In this piece, Ross Allan, Director of Property Data Solutions at Hometrack takes a look at the home insurance market and how the new FCA Consumer Duty might affect it.
As of this August, the UK insurance market will operate under higher and clearer standards of consumer protection, with insurers obliged to put customer needs first. But what are those needs, and how can they be fairly assessed if customers themselves are confused about their true requirements?
Domestic property claims acceptance rates within the UK have long lagged those of private motor insurance, and, according to the latest figures from the ABI, have given up all their gains since 2015 to stand at just 79% as of last year. Those figures mask some large differences between insurers, with some paying out barely half of claims. While part of this discrepancy may be related to claims walkouts, as customers change their minds when they realise their level of excess or impact on future policy pricing, this too reflects how customers often lack confidence on key details of what they’re paying for.
Winding back the clock to the early 2000s it was a similar story on mortgage decisions, with lenders struggling to achieve the confidence to offer fair and swift responses to customers due to the lengthy home valuation process. The arrival of AVMs – automated valuation models backed by robust databases of housing transactions and valuations changed this, and today our data is trusted by 85% of mortgage lenders. As of July, we’ve extended direct access to insurers, offering the potential for API integration when it comes to autofill and policy underwriting. With five years of Unique Property Reference Number (UPRN) data now available, the Hometrack database is relevant to a wide range of job roles within the insurance sector, from actuaries and underwriters; risk, audit and compliance teams even out to sales and marketing.
BETTER DATA ON PROPERTY
Reviewing property listing data also offers the possibility of allowing insurers to take proactive steps to assist customers by regularly reviewing property sale history and other house price data within our real estate database allowing insurers to ensure that if a property changes status to check that the customer has notified them. Such checks are becoming increasingly important, as keeping track of homeowner status has become significantly harder in recent months. Climbing interest rates and energy prices have seen many landlords swap their large family homes for smaller properties which they previously rented out. Our data shows that in the last 12 months alone, 67,000 homes have been switched from private occupancy to rental.
The FCA’s Consumer Duty has often been seen as a stick to drive change in the industry, but with the right tools to hand, fairer outcomes offer the industry an enticing carrot in the form of enhanced customer trust and loyalty and an opportunity to differentiate themselves in an increasingly competitive and commoditised marketplace.
Every year, our technology helps deliver 85 million automated valuations to support smart decision making, delivering a faster route to the all important ‘yes’ for aspiring homeowners. We’re excited that by opening up additional data to the insurance sector, we can work together to reduce how often insurers are obliged to say ‘no’ to those already hurting from unexpected events such as flooding and fire.
Making best use of available data in assessing claims and underwriting policies is not only the fairer route for insurers, it is the smarter route. I’m convinced that in the face of ever greater regulatory scrutiny, there are true commercial and ethical benefits in applying real intelligence to build a fairer future for all.