From January 2022, UK insurance providers will work under new regulations that will require them to ensure a renewal price for home or motor insurance is consistent with the price they offer a new customer, to help tackle the issue of price walking, also known as the loyalty penalty*.

The reforms are not just about the price of insurance, they are intended to ensure customers have the right product for their needs, and they are getting fair value over the long term. 

The new regulations pose an extraordinary opportunity to the insurance sector to improve the consumer experience, and indeed trust in the industry and will put a much greater demand on the use of data to better understand and serve the customer throughout the policy lifetime. 

If a consumer trusts they are getting a good deal and products right for their needs, they will not only want to renew, they could buy other products from the same brand. It works for both the customer and the insurance provider.

Clearly, customers who don’t shop around for insurance and stay with the same insurance provider year after year are those most set to benefit from the reforms to insurance pricing.

Based on a sample of policyholders who have renewed their motor policy every year for the past five years we found in that around one in four people have renewed their motor insurance policy each without shopping around and may have been charged more than a new customer by their insurance provider over time**.

Offering products that are suitable and achieve fair value for customers will require insurance providers to understand much more about the individual as well their risk and leveraging all existing data held on a customer, should be high on the priority list.

By using a unique identifier such as LexID® for Insurance customer data from claims, marketing, quotes, different lines of business or customer databases that come part and parcel from a merger or acquisition can be connected, and the result is a ‘Single Customer View’.  This consolidated and accurate view of every customer based on their history with the insurance brand or brands can then be used at every touchpoint and built upon to create a 360-degree picture of their risk and needs. 

It can help make marketing more relevant, pricing and underwriting more accurate and enable insurance providers to deliver a swift and empathetic and claims experience. The single customer view not only improves data accuracy and helps identify product suitability, it tackles a very basic annoyance of having to repeat the same information to different departments.

Data enrichment at the point of quote has become standard practice in new business quoting to help build a more informed view of a customer. As renewal pricing strategies will need to be consistent with current new business pricing, we expect to see a real shift in the use of data enrichment at renewal.

The motor insurance market already has access to market-wide policy history, quote behaviour information and some claims information.  Recent innovations in vehicle data provide a much clearer view of the vehicle and can provide a way to do more for the customer – reward them for the Advanced Driver Assistance Features on their car or enhanced cover based on a change to their vehicle’s valuation. These are just examples of the types of data that can leveraged to build the understanding of customer needs throughout the lifetime of the policy.

Data enrichment platforms such as LexisNexis® Informed Quotes allow a swift risk assessment at individual, asset, household and postcode level with intelligence delivered on all individuals associated with the quote in a single transaction, for example additional drivers and joint policyholders in addition to the proposer or main driver.

In essence, insurance providers can take advantage of one gateway to a host of datasets during the quote or renewal process, undertake due diligence checks and validate information supplied by customers to help deliver the consumer outcomes the FCA’s pricing remedies are intended to create.

With a holistic understanding of risk, insurance providers can know that the product that’s being offered to the customer is suitable for the consumer’s needs and the provider may be able to identify additional products and add-ons  relevant to the individual.  This has the potential to change the perception of insurance to become something that is valued and recognise it as the enabler it is for people’s  day to day lives.

Knowing the customer is the key to better serving them, and data will be the insurance market’s ally in one of the biggest regulatory changes the market has seen in recent years.

*General Insurance Pricing Practices Market Study: Feedback to CP20/19 and Final Rules published by the Financial Conduct Authority.

Follow the link to the LexisNexis Risk Solutions website to find out more about how we support insurance providers.