The push for data-driven solutions to tackle quote manipulation is reaching top of the agenda for insurance professionals as the cost-of-living crisis deepens and the risk heightens for fiction instead of fact in insurance applications as consumers search for a cheaper premium.  Indeed, in our LexisNexis Risk Solutions study* conducted amongst 1,500 motor insurance buyers in April 2022, one in five thought it completely acceptable to manipulate the details they provide for a cheaper motor quote.

This comes at a time when the insurance market is adjusting to the FCA’s pricing rules and must justify its pricing decisions at new business and renewal based on the data used at quote, including customer declared information.

The concern is that motor insurance pricing accuracy is being impacted by consumers misstating key facts: the bigger concern is how to identify when this might be happening.

Deliberate misstatement of key facts, for example, occupation, years licence held, annual mileage or vehicle modifications, is illegal and risks the policy being void if the true facts are established at claim. However, with 22 million UK adults expecting their finances to worsen over the next three months and the Centre for Economics and Business Research (CEBR) warning that inflation will cost the average household £2,320 in 2022 it comes as no surprise that 68% of car owners are seeking savings on their motoring spend this year including shopping around for cheaper car insurance.

Despite the best efforts of the Financial Conduct Authority (FCA) to level the pricing playing field, people still feel that insurance costs too much. In fact, the latest data shows that UK car insurance premiums have risen. For the first time in 18 months, car insurance prices are now more expensive than they were a year ago, on average. 

So, as more and more people chance what they view as a ‘white lie’ on their insurance applications, insurance providers need to understand the probability of this occurring, at the point of quote, so that they can price based on a more informed view of the risk. This information also gives them an opportunity to question the validity of the data with the applicant.

The insurance industry is all too well aware that deterring fraudsters is not something that can be done in silo, collaboration is needed. In this vein, it is only through connecting and comparing thousands of insurance quotes from across the market that insurance professionals can obtain data that helps indicate the probability of quote manipulation as consumers change the information provided to seek a cheaper deal.

When used to support pricing and underwriting practices, these additional data points can help cut potential fraud at application stage, save post-sale operational costs and importantly, help insurance providers reduce loss ratios.

Quote behaviour data already offers a unique insight into customer needs based on how, when and if the individual has shopped for insurance. As well as helping to fight application fraud, this data can be valuable in helping insurance providers consider the suitability of products and pricing. It stands to reason that when insurance providers understand insurance shopping trends and behaviours, they have an opportunity to help address fraud and offer valid customers a better experience. They can look at the timing of quotes and correlation to claims propensity, or valuable information on the connections between a proposer and named drivers using combinations of addresses and vehicle registration numbers.

Now, this same market-wide quote behaviour data can reveal the probability of quote manipulation by comparing changes made in key fields in quotes over time.  Furthermore, deeper analysis will allow us to correlate quote manipulation with the risk of claims to add a further layer of granularity to the understanding of risk for more accurate pricing.

As inflationary pressures squeeze household incomes, people will continue reining in their spending amid the soaring cost of living.

By using market-wide quote behaviour data to obtain clearer risk profiles, insurance providers won’t be the only party to benefit. Any measures to help cut fraud can, in turn reduce the cost of car insurance. Customers will also enjoy a more streamlined quote process and if insurance providers can nip possible misinformation issues in the bud during application, there will be no nasty surprises waiting for either party should a claim arise. 

So, the use of quote intelligence at the point of quote has advantages not just in reducing quote manipulation at application, but value for the customer throughout their policy lifecycle. While there is obviously a financial investment needed on behalf of insurance providers, the pay-off is clear: accurate and more profitable underwriting and a prime opportunity to educate, and ensure customers have the protection that’s right for their risk.

This article first appeared in Actuarial Post and is reproduced with consent.

*LexisNexis Risk Solutions was not identified as the sponsor of this research, which was based on a survey of 1,546 consumers who had bought motor insurance online within the last 12 months and was conducted during April 2022.

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