With the BIBA show just around the corner, now is a good time for insurers and brokers to think about the latest trends in the post-pandemic market. As working from home becomes the norm for millions of us, insurance is changing and the demand for new hybrid home/business products, embedded cover and more personalised risk profiles, is set to increase rapidly.
IE talked to LexisNexis UK and Ireland MD Jeffrey Skelton to find out more.
IE; Has the pandemic affected the use of LexID®?
JS; LexID® has started to pick up steam in the market. Whether that is down to Covid is debatable, but the underlying concept is about managing customer identity. That value proposition was established pre-pandemic. But once we got in deeper into the pandemic customer behaviours started to change, we are now taking that concept and applying it to other aspects of the business.
So for example we can use LexID in the Claims area. The idea is you can quickly connect the dots and use the information just when you need it. It becomes a helpful tool, especially with FNOL. Once insurance companies grasp what’s happening in their claims, then they can start using that data to inform sales and marketing. So then it matches up all the right pieces of information where you really need it. LexID allows insurance brands to use the information they already have in their systems.
IE; It kind of empowers them to join their own dots?
JS; Yes, and they need to. At the end of the day the claims process is the product, it’s what the customer bought insurance for. So the customer wants things to be smooth, triage of claims is the best way forward for them. The quicker you can understand who the customer is, see all their data, then the quicker you can deal with the claim. I had a claim here in the UK and when I called in the insurer didn’t say `thank you for two years of service, I see this is your first claim.’ It was just `what’s your policy number?’ So having more data at your fingertips during FNOL has to be a good thing, because the consumer should expect the company to know policy number, and policy history when you get in touch.
So LexID allows you firstly to know the customer history the moment they call or email. Plus it gives you the chance to know that it’s a third party making the claim related call, so it’s an opportunity for your brand to make a great impression on someone new. Then you could turn them into a future customer.
IE; Let’s move onto pricing, how much more valuable is data becoming after the regulatory changes in the Motor market?
JS; Fact is, every insurance brand in the motor market needs more data at renewal time now. Now, an insurance provider is tasked with finding reasons to offer a reduction in price at renewal time, a loyalty discount, but how do you do that if you can’t see a full picture of the policyholder?
IE; This has been the complaint by loyal customers for a long time; people see a cap on NCD at 9-15 years whatever. They might insure two cars, home, Life etc. all with one company and there’s no discount. Then they find out their neighbour is paying less than they are, simply because they switched insurers that year. So do you think there is a way for insurance brands to join up all kinds of policy history data to offer better Motor premium prices?
JS; You should use that policy history, yes. Knowing who your customer is really matters and to give you an example I made a claim on my Home policy after a wall collapsed. But a few months after my car cover was renewed and it went down, which makes you realise that two departments aren’t really talking to each other.
JOINING THE DATA DOTS
IE; The data has been held in silos for decades, but now all kinds of data sources and touchpoints are available for insurance brands. Are you seeing more home and business hybrid policies, backed up with cross-referenced data?
JS; One of the things LexisNexis Risk Solutions has done with LexisNexis® Precision Claims is build a product that offers these crossover insights. Particularly on home insurance, where traditionally the quote is based on asset values, building itself plus contents right? But after the pandemic so many people are running side line businesses from home, building extra garages or workshop/storage space and so on.
The picture of home usage is more complicated. So cross-pollination of SME commercial, home and motor is on the rise. We have seen a huge increase in the sale of light vans, as people are setting up delivery businesses, but are they insured for that? The risk changes as regards home because of the commercial vehicle usage, so are they declaring that business activity, and if so are your home quotes reflecting that complex risk?
IE; So a delivery business can mean goods stored at home; are they fully covered, are any of the good hazardous to health? Who else is visiting the home to drop stuff off and so on?
JS; Exactly, you need that bigger picture. One thing that the data can definitely tell you is that prior motor claims are part of a predictive process that you can apply to home policies or a hybrid home/commercial policy too. What it comes down to is how many people are using that home address, what are they using it for, how many vehicles are kept at that address and so on? Then you have to track back into the history of those vehicles because that affects the pricing of the home risk in the future.
Now we are entering an inflationary period people are going to be looking for ways to make extra money. That means extra work, which means new risks.
IE; You see that with influencers on YouTube. Is everyone rescuing scrap cars and motorcycles insuring the risk of having them stored in their garage? Are the people reviewing luxury handbags or watches declaring those high value items? The recession caused by the cost of living will prompt people to transform their home into a place of business.
JS; Right, in some ways I wish we could get Precision Claims running sooner, but it’s great that the insurance industry has responded so well to the concept of contributory data, of joining those dots. Normally the industry is like a bunch of people standing around the swimming pool looking at the water and waiting for someone to get in and swim. But now, they wanna jump in first; everyone can see the value in richer data. More than that, the early adopters said to us, I will be an advocate for this solution.
IE; That’s a fundamental shift for the industry?
JS; Yes, huge change from old silo model of storing data. The new FCA regulation is going to drive this search for new nuggets of data. If people cannot save by switching, then they will want a discount for loyalty, or other risk factors. You cannot give a discount to everyone, so those who share data are best placed to get the better deals. In the end you have to get better at personalising underwriting because that’s where it matters.
IE; Covid proved that modelling doesn’t always get things right, so how can insurers model risk in the future, is part of that process modelling sentiment? Say for example people are talking about stockpiling food or fuel, is that something you can factor into covering homes with outbuildings, or commercial premises?
JS; During Covid we saw that when supply chains were disrupted then inventory went up, as commercial companies began to resolve supply chain problems by dropping the just-in time model. Again much of this is linked to the boom in van sales, because much of that is linked to shifting stock around, or storing it. We can see the van being registered so it’s now time for insurance providers to ask the extra questions; what are you using that van for, is this a new business idea? Everyone in the industry has to be aware of GDPR, but knowing that the primary insured has a car already and has bought a van, now means that you need to start a conversation with your customer.
THE PRE-FILL DREAM
IE; How close are we to getting the essential facts pre-filled, to save consumers wading through those 9 pages of questions?
JS; Very close, and we need Insurance Edge to tell people about Commercial PreQuote from LexisNexis Risk Solutions.
We started with a pilot project on Commercial, which ran for three months, and it populated and validated quotes with known facts like rebuild cost, a business’s financial position etc. We now have smaller brokers involved and their clients often have different needs, or perhaps are more niche, so we are fine tuning the package all the time. PreQuote can be customised by the broker so it works as a time saver for them, and their customer.
Commercial customers tend to be time poor so testing pre-fill and pre-quote tech this way is ideal, it lets you see what works in the marketplace, what people like about it and so on. When you aren’t focussed so much on collecting known facts, you can focus on the real risk instead. It helps you the broker sell the right cover, because you can only match needs to risks.
LexisNexis Risk Solutions has established itself as a trusted steward of third party data and that adds value across the industry. We are seeing demand from all types of insurance providers in terms of getting more information into the system. Better data, better models, better pricing – that’s how it should work. The UK market has an advantage in that you can develop and test and then launch new products, or tweak existing ones, and then test them out. So it makes sense to use that advantage.
COMMERCIAL AND CYBER
IE; Do you think with Commercial it’s interesting for insurers to know which companies have detailed cyber attack plans, that it acts as an indicator of resilience to risk?
JS; It is an interesting point, because we hear about the big cyber stuff, pipelines being shutdown or whatever, but there are lots of small attacks, payments of ten grand or something, but if there are outages and data breaches, you understand more about the business itself, how it’s run day-to-day.
Before Covid, cyber was one of the biggest topics in the industry, but now the conversation has moved to supply chains. But if you think about inflationary times ahead, you might consider that larger companies now face the risk of rogue employees. We get requests from insurance companies for checking on companies as suppliers, because the due diligence is an integral part of the Commercial or Cyber risk profile.
If you look at the reviews of companies on Glassdoor, it’s amazing, you can actually see the sentiment from current or ex-employees, which is often an indicator of what might be happening, or about to happen. Now AI could drill into all that data and identify companies that could be targeted.
IE; Yes, if LexisNexis Risk Solutions could overlay Glassdoor, Trustpilot, LinkedIn and other review sites you could offer a snapshot of employee sentiment, a sort of internal cyber Risk-O-Meter.
JS; That’s an idea for the Patent Office right there! But seriously, it does highlight how innovation is often about taking what’s there, and making it better. Or like an iPod, it’s a product that nobody thought they needed until it was offered and they realised, hey, that works better, I like having everything in one place.
Lots of what we do at LexisNexis Risk Solutions is about bringing the right data together for the industry, at exactly the right time.
IE; You must see a demand to deliver that data ever faster, because everyone is searching for the data that allows them to be £15 cheaper than their rivals?
JS; Often that price differential comes down to a question that wasn’t asked in the past, so you paid out on a large claim. So changing forms, the way questions are framed, is always hard to do. So if you can pre-fill or pre-validate a huge chunk of that, then the routine Q&A becomes a shorter process, and that lets the brokers or insurance brands have those conversations that are specific to their niche.
If you spend time asking customers what type of roof tiles they have, you risk missing the pieces of data that actually matter when it comes to a claim.
EMBEDDED COVER OFFERS CONVENIENCE
IE; Is embedded insurance online a growing proposition?
JS; Yes for sure. All those online services and products, stuff you hire out, or a part-time business, then you need insurance that can start and stop easily. So delivery people can buy embedded cover with the van or car hire. Even domestic car drivers may choose not to own a car, but just hire one for longer trips, so again you need embedded cover than understands the customer ID, their history, other passengers in the vehicle, usage etc.
IE; Insuring e-scooters is a good example of embedded cover offering extras, like accident or income protection. The asset is covered, which is fine, but for some hirers the risk of being off work for 6 weeks with a broken wrist is worth covering. So if you know key facts about the hirer, you are ahead of the game.
JS; There are always these `what if’ moments. You see it in the travel market, where embedded insurance can offer all kinds of extra cover on the trip, on hired vehicles or excursions and that isn’t always offered when you book the holiday. There is huge potential in embedded insurance and it’s had a bad rap in the past, partly down to the electrical appliance cover, but as we begin to rent a lifestyle more than own lots of assets, maybe the time has come.
IE; Jeffrey, great discussion, thanks for your time.