What do rising asset values in the motor and property markets mean for insurers and brokers? James Burton, Senior Director of Product Management, at LexisNexis Risk Solutions takes a look.
ABI data shows insurance providers are facing rising claims costs in home and motor – dealing a double blow to general insurers with feet in both camps. It has therefore become even more critical for insurance providers to access accurate, real-time data on the assets they are insuring, at quote.
There are a number of factors at play giving the market cause for concern. In home insurance, there has been a rise in home values in the past year driven by lack of housing stock, plus supply chain issues are having a knock effect on building material costs. One recent article on the matter cited a 56% increase in the cost of plywood. Cost consultant Arcadis is also predicting a second wave of materials price inflation in 2022 driven by high energy costs.
Against this backdrop is the constant threat of extreme weather and flood events. The number of home insurance claims from weather losses increased 89% in 2020 vs 2019. Of all weather-related events, flood claims are the biggest cost to the home insurance market and 2020 saw £266m in gross flood claims, the highest figure since 2015.
In motor, the latest Auto Trader Retail Price Index confirms used car prices rose 31% year on year in January 2022. In fact, the average price of a used car on Auto Trader now stands at £18,067 an increase of nearly £3,300 in the last six months. This acceleration is being fuelled by an imbalance of supply and demand in the market – the ongoing constraints in new and used car supply, coupled with exceptionally strong levels of consumer demand.
While the motor insurance market experienced a sharp fall in the number of claims in 2020 due to the series of pandemic lockdowns, data collected by the ABI shows that theft from vehicles and theft of vehicles remained at a consistent level from 2019. There were 61,000 theft claims in 2019 and 60,000 in 2020 – notably these are the highest figures recorded to date. Indeed, settlements for theft from vehicles reached the highest level recorded since 2016.
Access to accurate, up to date valuation data on home and motor at the point of quote has never been more important and two innovations in the past year have put this data directly into the quote process via the LexisNexis® Informed Quotes data platform, for the first time.
Cazoo Data Services’ innovative valuation and insight service uses big data from classified car ads to produce a vehicle value that is a better indication of its worth on today’s market. Cazoo’s data spans the globe and covers over one billion unique data points, giving exceptional levels of enriched data about individual cars.
In home, LexisNexis® Property Insights is one of the first property data enrichment solutions to combine multiple predictive attributes for an individual address from the choice of 27 property characteristics from Outra, the predictive data science business. From rebuild cost to square footage and listed-building status to roof type, home insurance providers can now assess risk based on insights from an extensive set of data about a property down to its individual characteristics, going beyond the information traditionally used or requested in the quote process.
The data available from Cazoo Data Services and from Property Insights can be injected at the point of quote through the LexisNexis® Informed Quotes platform, which connects to all major software houses. This offers a single point of access to a highly comprehensive range of datasets to help inform quoting and underwriting decisions, allowing insurance providers to speed up the quoting process and reduce referrals. The data can also be used to pre-populate application forms, for example, rebuild cost and year built, saving consumers time while helping to ensure accurate and competitive quotations.
The benefit to insurance providers of having one gateway to the depth and breadth of data offered by Informed Quotes, including asset valuations data cannot be overstated as the market continues to adjust to the new pricing rules. The platform allows insurance providers to build a very detailed picture of risk for new business and renewal pricing, while helping to ensure products are suited to the customers’ needs.