Direct Line Valuation Issue is An Opportunity To Embrace Open Data

Last month Direct Line were in the mainstream media firing line, as the FCA ordered them to review their last five years of motor claims settlements. The issue was specifically one of valuations of vehicles that were written off and whether consumers were underpaid on vehicle values. It’s a tricky area for insurers, as owners obviously have their own views on their car’s worth in the market. Often that is based on ASKING prices online, not the actual sales prices at auctions, or PX prices offered for trading in.

Then there’s the separate issue of values being linked to the exact spec of a given model. For example, two prestige German cars, sharing the same mileage, service history, year and number of owners, may have entirely different options lists. The model with leather interior, ADAS features, passenger headrest media screens, BOSE sound, comms tech, special wheels etc. is likely to be worth quite a bit more.

The FCA action is likely to cause Direct Line, and other insurers, a significant level of expense as historic data is gathered on write off values and how they were calculated. It’s worth stressing that Direct Line feel they offered a fair write-off value in most cases;

Direct Line told the Guardian;

“We expect that this will affect a minority of customers and the vast majority of customers will not be impacted. Customers do not need to contact us, either directly or via third parties, as we will contact impacted individuals to apologise and provide appropriate redress, including interest.”

It’s unlikely to be that easy however, as the UK is now a market where people feel entitled to compensation for all manner of perceived wrongs. In fact Resolver are all over the Direct Line case already, which may well generate more complaints in general, not just for Direct Line.

So the insurance industry should be looking at how vehicle valuations are worked out, and perhaps making some of that process clear and transparent to the customer as part of the claims settlement offer.

DATA SOURCES

Companies like CAP HPI are well established in the UK motor trade and offer Black Book Live; a real time barometer as regards market values. It’s a service very much focused on PX prices, so for insurers this needs some fine tuning as regards any settlement offer. Glass’s Guide does a similar thing, again based on defining typical or average PX values, so that sales staff can close a deal quickly. In some respects, these trade values offer insurers a kind of baseline starting point, so they have some use.

But at the end of the day an insurer isn’t trying to sell a newer car on finance, so the valuation needs to reflect something more personal and unique to that customer’s vehicle. Insurers also need to factor in specific details on servicing, wear and tear, ADAS, options, upgrades or accessories fitted etc.

Companies working along these lines already include CDL, LexisNexis and Percayso Inform, who now own Cazana. IE spoke to Kieran Fisher, Head of Vehicle Intelligence at Percayso Inform, who noted that;

“People want fair valuations, the challenge for the industry is how to ingest all the necessary data specific to make, model and options. Those optional extras do make a difference by the way, but not as much in percentage terms as many drivers think. In the past an average figure was often worked out based on trade prices, local selling prices, auctions etc. That really isn’t good enough now so we use tech to provide an evidence based assessment of the vehicle’s true value.”

How does that work?

“Our tool starts with the vehicle registration plate, then mileage, colour, service history, recalls by the manufacturer and so on. We check real time trade prices too. All of that is automated within a second or so. That means you can start to triage repair vs write-off during the FNOL stage. Massive saving in time and money thanks to that data. One Percayso client tested our valuations on 5000 vehicles and we were just 0.2% lower than final settlement figures.”

There is another benefit worth noting; Percayso has found that offering a data-based valuation early in the claims process can reduce the chance of an escalation, or disputed claim by around 62%. In short, customers value accuracy and most likely will compare any figure offered by searching Google themselves, by make and model, mileage etc.

“If the insurer can start by offering a fair and data driven valuation then the entire claims process can be less stressful,” notes Kieran, “it’s a distressing time for lots of policyholders and the best way to reduce that stress, and ultimately retain that customer, is to deal with them fairly at every stage. As the new FCA Consumer Duty comes into effect the value of showing how a figure was worked out will probably become even more important.”

Accurate values can really pay off long term for the insurance sector, helping brands stay FCA compliant and retain customers. What’s not to like?