This article first appeared in Insurance Wire and is reproduced with consent.

Whilst the COVID-19 pandemic has impacted many areas of the insurance industry, there’s no doubt it has accelerated the use of technology to better serve the customer. The pace of digital adoption and the movement to more digital channels have given the consumer a smoother and more transactional relationship with their insurance provider with the expectation that any interaction should be managed efficiently – whether it’s a mid-term adjustment, a renewal or a claim. That expectation will continue on the other side of the pandemic.

Alongside accurate and fair premiums at new business or renewal, consumers are looking for short and automated quote journeys, a simple claims process with fast payouts, all with an empathetic customer experience from the insurance provider. ‘Knowing the customer’ is not just a growing requirement in a regulatory sense. It is key in being able to deliver the experience customers expect at each stage of the journey.

Access to industry-wide past claims data will play a key role in helping the market respond to these changing dynamics, whilst also helping to tackle the rising risks of fraud. Home insurance providers will be the first to take advantage of this new data stream, enabling them to better understand the full risk of the customer and a property using highly granular claims data alongside a wide range of public and private data sources from one access point. The extent to which home insurance providers may benefit is clear in a recent UK consumer study by LexisNexis Risk Solutions*.

Our LexisNexis Risk Solutions study* found that two in three homeowners and renters believe it is acceptable to manipulate the information they provide when using price-comparison websites in order to get a lower quote for home insurance. Furthermore, about half of consumers who have recently filed a claim are more likely to consider adjusting or exaggerating a future claim in order to get a larger payout.

These risks are likely to increase during the pandemic, as some customers may be tempted to commit fraud in part if they are experiencing financial stress. Criminals, meanwhile, will continue to search for potential opportunities to commit fraud, including insurance application and claims fraud.

Aviva recently stated it had uncovered more than 12,000 instances of claims fraud in 2020, worth more than £113 million and they are likely not alone.

The pandemic is not the only event that has disrupted the industry. The pricing regime from the regulator, the FCA, may lead to a heavier focus on customer experience and differentiation. Not only will a market wide contributory claims database provide insight to assist in reducing insurance application and claims fraud risks, but it will help improve the overall underwriting, pricing and claims process.

Insight from our LexisNexis Risk Solutions study* demonstrates the significant role that the claims experience plays in whether a customer stays or switches at renewal. Competitive pricing, good customer service and a positive experience when filing a claim can all reduce the likelihood of customers switching to another provider. On the flip side, the study found that more than one in three individuals who have filed claims recently think that providers try to avoid paying out claims all the time.

Overall, a third of consumers shop around if they feel their renewals premiums is too high*, and homeowners who see their premiums increase are almost twice likely to switch as those whose premiums do not.

These findings reinforce how insurance providers need to remain active and attentive to their customers’ needs from a pricing and policy perspective to help engender loyalty, but also how vital it is to get the claims experience right, using data to streamline the process from FNOL to settlement.

If, for example, you know a customer has had three claims in the past six years for a burglary, and you know the cost and circumstances of those claims without having to ask the customer to relive the trauma, this presents an opportunity to provide a level of cover more personalised to that risk and a claims experience fully cognizant of the customer’s past experience.

The claims dynamic has already been positively impacted by technology, with connected home security systems and escape of water shut-off devices to help mitigate risks. Contributory claims data can take the claims process a huge step forward by supporting more automated processes and ultimately dealing with genuine claims quickly and efficiently.

A market-wide contributory claims database for the home insurance market is set to help insurance providers identify where risk exists across a business and customer lifecycle, at point of acquisition, renewal and claim. With new pricing regulations on the horizon, granular claims data can support a much more granular understanding of risk at renewal so that customers are not only priced accurately but are offered the type of cover that is appropriate to their needs.

*LexisNexis Risk Solutions Home Insurance Study: LexisNexis was not identified as the sponsor of this research, which was based on an online survey of 3,083 residential homeowners and renters (including 1,576 homeowners and 1,507 renters). The research was completed during 2019.

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