It’s estimated that up 30% of the information used for underwriting in commercial SME insurance in the UK is inaccurate, when looking at across at the book of business for a typical insurance provider*. Our surveys of the sector have shown the information gaps over and over again, with basic information missing on things like the risk address, business owners, business activity, property data and so on.
Over 67% of commercial insurance providers in our LexisNexis Risk Solutions survey said they favour a centralised property data exchange**. while 81% said taking better advantage of data and analytics is a key area of focus for their business in the longer-term. But with small businesses coming in so many different types, shapes and sizes, such data standardisation and data availability has traditionally been difficult to achieve.
We’ve been actively addressing this market need and the demands for data enrichment. The drive for change in the SME insurance segment comes at a time when the FCA is reinforcing its Treating Customers Fairly (TCF) principles. In personal lines insurance the regulator is calling for more action on appropriate pricing, more rigorous Know Your Customer (KYC) processes, to facilitate a more transparent market, especially around renewals.
Similarly in commercial lines, the FCA has been reinforcing these principles of transparency and fairness, for example in relation to finance and the appropriateness of cover recommended.
Now, with the launch of Commercial PreQuote from LexisNexis® Risk Solutions, brokers serving the SME market can validate customer-declared data prior to quote as an integral and streamlined part of the e-trading process. It is a completely new data enrichment solution developed specifically for brokers serving businesses and sole traders.
Commercial Pre-Quote is being made available via the Acturis e-trading platform to help their brokers capitalise on the record growth in new business creation and start-ups in the UK over the past year.
Whilst 2020 was difficult for SMEs, businesses are emerging as more digitised, more agile, still under financial pressures, still under-insured, and they come with new risks and new challenges for risk assessment. Government data*** shows that at the end of 2020 there were 6.0 million private businesses in the UK, a rise of 113,000 compared to 2019. The number of sole traders has been increasing at a much faster rate. As of 2020 there were an estimated 4.5 million people trading as a self-employed business. These trends are serving to grow the number of small, e-traded policies, bringing also demands for a fast, consumer-like experience.
The challenge for insurance brokers in this diverse sector is they’ve traditionally taken onboard the data provided by the customer at face value for e-traded quotes. This can mean time wasted on referrals and checking details back with the customer as part of the due diligence process. Then issues and dissatisfaction can come in the claims process if it’s found that the customer has under declared certain risks or valuations.
Commercial PreQuote from LexisNexis Risk Solutions brings validation that the data used for pricing and underwriting a property (for example a landlord policy) is accurate. The broker can be assured that the risk is right for the insurer panel and this can help eliminate unnecessary delays or friction with the customer.
There are three core elements to Commercial PreQuote from LexisNexis Risk Solutions: firstly LexisNexis® Risk Insights, secondly business data (confirming the name, address and directors of the business and the nature of the operation to provide a further layer of validation), and thirdly LexisNexis® Property Insights (for example where residential property information is needed, for landlord insurance, brokers can validate the risk based on data about the property from year built to rebuild cost).
We are delighted to be working with Acturis to help tackle the data accuracy challenges that have been ever-present in the commercial market. This will enable brokers to deliver an experience to commercial SME insurance customers with some of the benefits enjoyed in the quote journey for personal insurance.
Brokers serving the higher-volume, typically lower premium commercial SME insurance market, need to be highly efficient in all they do while delivering reassurance and customer insight that these businesses will value. The initiative is based on what the market has been telling us and the time is now right to bring data validation through Commercial PreQuote to this fast-growing sector.
Brokers and insurers can truly leverage the opportunities the SME sector has to offer whilst broadening the quotable footprint of new business, and protecting themselves from any potential fraud risk that might become evident through the data validation process.
Visit the website for more information about Commercial PreQuote from LexisNexis Risk Solutions.
*LexisNexis Risk Solutions research July 2021.
** LexisNexis Risk Solutions UK Insurance Underwriting Digitization Study and Commercial Property Insurance Study, 2018-2020.
***Data from the Department for Business, Energy and Industrial Strategy (BEIS) publication, ‘Business Population Estimates’
Follow the link to the LexisNexis Risk Solutions website to find out more about how we support insurance providers.