In this article, Martyn Mathews, Senior Director of Personal and Commercial Lines, LexisNexis Risk Solutions takes a look at the many ways you can really get to Know Your Customer.
Knowing the customer has taken on new meaning in the new insurance pricing environmenti as the market looks to deliver fair value to customers in products and pricing at new business and renewal.
It is perhaps no longer enough to simply confirm the basics about the individual and the asset to be insured – whether that’s the car or the home. Or, to put the onus completely on the customer to confirm any changes at renewal. Insurance providers need to understand much more about the risk to ensure they are offering the appropriate cover, premiums that are fair and to be able to demonstrate to the FCA the steps they are taking to deliver the correct consumer outcomes.
Availability of data to inform pricing decisions is not the issue, it’s access to the right data at the right point in the customer journey that is going to help determine how well the market is able to deliver on the FCA’s objectives, particularly at renewal. At LexisNexis Risk Solutions, we believe there are some key ‘hygiene’ checks insurance providers can take when looking at their data strategies to meet the new pricing rules:
1. Create the Single Customer View
Insurance providers with multiple customer databases (claims, marketing, quoting for example) as well as customer databases acquired through merger and acquisition activity, should consider bringing these together to create a single customer view that will support better engagement with that customer in its individual pricing and underwriting process. Linking and matching technology together with a unique identifier such as LexID® can help solve the problem of matching multiple datasets together. This will help insurance providers maximise the data they already hold, which will be key in assessing risk at renewal. Understanding, for example, that Mrs Smith renewing her home insurance was also a motor insurance customer in 2019 might put a different perspective on the pricing decision.
Also, approaching policy renewal, there will be existing customers that shop around and request new business quotes from their current provider. Therefore, knowing when it’s the same customer can help an insurance provider flag these events and get a better understanding of the customer’s needs to support pricing consistency and retention strategies during the quote process.
2. Streamline how you take data
Calling out for data from multiple sources for pricing decisions can be inefficient and can create a poor customer experience. Data enrichment platforms such as LexisNexis® Informed Quotes are designed to 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.
Brokers should look for data enrichment solutions designed specifically for their needs. Solutions such as Broker Intelligence offer streamlined access to a specially selected and powerful range of data attributes about an individual, including their motor policy history, at the point of quote or renewal. This can be through direct integration with LexisNexis Risk Solutions or via their preferred broking platform or software house.
3. Understand the market’s experience with the customer
Market-wide policy history, quote behaviour information and claims data can build the understanding of risk for an individual across all lines of business. In motor, the volume of data available to the market is expanding rapidly to include new insights around motor insurance cancellations and gaps in cover, as a direct consequence of the pandemic, which can offer valuable context for the actions people have taken during the past year.
4. Know more about the metal
New sources of high-quality data on valuation, mileage and MOT history add to the insights on the individual. Understanding more about the present and future value of the vehicle can open the opportunity for insurance providers to be far more granular in their pricing at renewal. This type of data also allows for more engagement with the policyholder during the policy term which might make the difference between them staying or going at renewal.
5. Build a better understanding of property risk
Insurance providers should look to use address level geospatial data intelligence on perils such as fire, flood, subsidence as well as local hazards and crime rates to help calculate the likelihood and cost of an insurance claim. Real-time environmental data will also allow insurance providers to calculate their exposure to risk in near real-time. Soon, claims data for both the property and the policyholder will bring a further layer of understanding to help deliver more fair pricing at renewal.
Clearly, the more data-led insights insurance providers have, the more accurate the risk assessment and subsequent pricing decision. By taking advantage of a single gateway to a host of data enrichment datasets during the quote or renewal process, the task of due diligence checks, validating information supplied by customers and building the picture of the individual based on the range of insurance specific insights now available to the market becomes far easier. By knowing the customer to this degree, insurance providers can be more confident they are offering the right cover for the right risk at the right price.