This latest piece is by Kieran Fisher, Account Director at Percayso Vehicle Intelligence. Smarter use of data can enable insurers to offer fair value to careful drivers, even in a time of high inflation.
There’s no doubt that motor insurers are operating in a tough environment. Sharp rises in the costs of parts and labour as well as supply issues have all contributed to a 14 percent year on year rise in payouts.
At the same time, the cost of living crisis could see some consumers less able or willing to maintain their cars – potentially leading to more accidents. And when bank balances are stretched, there are those customers who may be tempted manipulate quotes by “playing” with the value of their vehicle or providing inaccurate estimated mileage profiles in order to pay a lower premium.
However, if any insurers were considering taking a tougher stance on valuations, the Financial Conduct Authority issued a warning back in December against undervaluing vehicles when settling claims. This was reiterated by further written communication this summer with all major insurers, not only clarifying that this is an area of focus for the regulator but that it’s not just a case of doing the right thing going forward, but past actions will also face scrutiny.
So what can motor insurers do to ensure they offer fair value while at the same time write better business – and, of course, avoid falling foul of the regulator?
It’s a delicate balancing act. On one hand, insurers want to make the process of buying insurance and making a claim as simple as possible, but on the other, there’s a necessary degree of complexity that comes with conducting appropriate risk assessments, setting accurate pricing and identifying potential fraudulent activity.
The good news is that providers such as ourselves are unlocking vital new datasets to deliver even greater insight to insurers, enabling fair and accurate valuations and premiums. And using smart APIs, this insight can seamlessly integrate with an insurer’s own system to create a smoother customer journey without compromising the quality of business written.
In my opinion, there are three best practices that insurers should be adopting if they’re not already:
1. Pre-populate crucial fields on behalf of customers
The quality of information inputted improves when a customer is removed from the equation and data science replaces human error. It also allows an insurer to expand the number of questions asked without adding to the customer burden. If an insurer can work with precise, accurate vehicle data then they can generate accurate valuations, deliver fair quotes and protect themselves from unnecessary risk.
For example, Percayso Vehicle Intelligence will automatically fill in as many as ten fields for the customer once they’ve typed in their VRM. It has been estimated that between 15% and 20% of dropouts in a standard car insurance journey come from questions relating to the specifics of a vehicle. Pre-population reduces the length of time it takes for a customer to get a quote, increasing customer satisfaction while at the same time reducing the risk of error or fraud.
2. Access the right data
Simply collecting lots of data rarely leads to new insights or new ways in which to determine risk and price accordingly. Motor insurers need to have the right data, provided in an easily digestible format. It must be consistent, with widespread coverage of the car parc, and provide a complete picture of any one vehicle to support pricing strategies and deliver fair value to their customers.
For example, data that shows a vehicle’s MOT history gives insurers crucial insight into a customer’s risk appetite as they can see passes and fails as well as recurring major and minor advisories. If a customer is seen to ignore advisories, this indicates that they are inclined to riskier behaviour.
Data revealing what options are fitted to a vehicle as standard, including advanced driver assistance systems and enhanced safety features, allows insurers to write the most accurate estimation for associated repair costs so quotes reflect the investment that may be needed.
Being able to scan vehicle specific advert text provides invaluable additional information about previous modifications, damage or options fitted that a customer may not reveal, unwittingly or otherwise.
Even certain vehicle colours can indicate a higher risk level so being able to flag this risk data can support underwriting strategies.
Being able to access hundreds of data fields to gain this level of granular detail from providers such as Percayso Vehicle Intelligence delivered in milliseconds through powerful APIs allows insurers to track market trends and swiftly adjust underwriting rules and procedures in response to risk changes.
3. Providing accurate claims valuations first time every time
The settlement of motor insurance claims has become a protracted negotiation process. Our customers have been almost trained to turn down the first offer, complain if they have to and take it up with the Ombudsman if they’re still not happy.
It’s a negative experience that not only can result in the loss of a customer but has also led to a process that is time-consuming and costly for insurers once the operational and staffing costs of negotiating the claim have been factored in.
It doesn’t have to be this way as there are solutions available to motor insurers such as our Companion vehicle valuation tool that enable them to offer quicker, fairer resolution of vehicle claims based on transparent evidence to streamline settlement, reduce disputes, improve customer retention and lower operational costs.
Offering a live, retail-backed valuation methodology reflecting market fluctuations and discovering relevant vehicles to back up valuations, empowers insurers to share evidence with their customers. One top 20 UK motor insurer using our tool reported a 62% increase in acceptance of first offer and a 50% reduction in complaints, lower costs and a less intensive labour process.
By using the right vehicle data combined with the right methodologies and seamlessly integrating these into their quote and claims processes through the right technology, motor insurers can bridge the gap between great customer experiences and underwriting profitable business. That’s a result that both the industry and the regulator surely want?
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