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Motor Insurance in a Digital World: Turning Data into Actionable Information

By 22nd February 2018January 21st, 2019No Comments
​We all know how fast the insurance sector is evolving in response to our increasingly data-driven and digitised world, and motor is leading the charge.

In a speech last year to introduce the Automated and Electric Vehicles Bill, Transport Secretary Chris Grayling underlined how motor insurance has grown into a massive industry that’s innovated in response to changing technology, legislation and driving conditions.

We’ve seen telematics technology evolve, and take up amongst consumers grow exponentially in the past seven years. But we’ve also seen how big data processing power, and data analytics, are bringing the customer view into sharp focus enabling, insurers and brokers to understand risk in a way that we would not have thought possible just a few years ago. 

Who knew for example that a policyholder’s motor insurance history would have a direct correlation with future claims costs, thus providing a powerful new attribute for rating?

Data will be key to fulfilling the government’s vision for the first self-driving cars on the roads in 2021, enabled by the creation of a compulsory insurance framework that covers motorists when they are driving and when they have handed control to the vehicle.

Understanding risk and liability is going to be heavily reliant on data collected from the vehicle.

But frankly this is the tip of the iceberg. Data and digitisation is fundamentally changing how many businesses, including insurers, operate and this is driving change in our laws.

At the ABI’s Insurance in the Digital World conference 2017, Minister for Digital, Matt Hancock also made a speech in which he looked to the insurance industry for its support and collaboration on vital changes to our laws in readiness for the digital age.

The Digital Charter the government has introduced sets out a framework for how businesses, individuals and wider society should act in the digital world.

Matt Hancock pointed out in his speech that all of the new technologies and capabilities revolutionising our lives are underpinned by the ability to collect, store, process and share data. The right frameworks need to be in place to allow data to flow while also protecting people’s privacy.

In the insurance sector I think we can safely say that the Minister is preaching to the converted. This is a sector that has managed customer data responsibly, securely and ethically for well over a hundred years.

The key change is that the data flow is becoming a torrent as the insurance sector looks to leverage behavioural data in response to consumer demand for more personalised services and future mobility solutions such as driverless vehicles.

Data analytics is undoubtedly vital to understanding customer requirements, upselling additional cover, more accurately assessing risk and pricing policies. And the fact that technological advances mean more data than ever is available, and new data sources are continuously being created can only be a good thing. Or can it? Is there such a thing as too much data?

The question is not necessarily whether there is too much data, but how every piece of information, every insight, and every piece of analysis is utilised, protected and stored. To a large extent, this is what we do at LexisNexis Risk Solutions, taking large chunks of data and converting that data into risk attributes, actionable insights, in effect turning questions into answers.

In the insurance digitisation study* we conducted late last year we found that 96% of personal motor insurers are already using data and analytics, and they told us this is either ‘extremely useful’ or ‘very useful’ to their business. And only fractionally less see that trend continuing with 82% of personal motor insurers believing that data and analytics ‘definitely will’ or ‘probably will’ transform their business in the next year or two.

Our study also identified that motor insurers in particular want to create differentiation through greater customer engagement and a better understanding of customer needs.

Some 70% of personal motor insurers told us that they see improved, more targeted marketing and enhanced customer experience as the main benefit of data and analytics.

Given the highly competitive, price-driven nature of the market this is not wholly surprising but welcome all the same. Data must be used to help deliver real and lasting value to customers: only in this way can the market help improve customer loyalty and reduce price only driven decisions and high churn rates. Crucially it will also help engender trust in customers in this new digital age.

Data and analytics has a central role in the insurance sector today and tomorrow, giving insurers a holistic view of customers enabling them to understand risk but also predict how policyholders might act, enabling them to apply the right strategies across their books. But the future ability to leverage data lies in generating and maintaining customer confidence and trust.

For more insights from these research results download the LexisNexis Risk Solutions white paper ‘Diving Together into the Information Pool: Are Insurers Putting the Power of Contributory Databases to Good Use?’

*LexisNexis Risk Solutions carried out an anonymous survey, the UK Insurance Underwriting Digitization Study, 8 December 2016–9 January 2017. Mixed mode of data collection: online panel and telephone interviewing. The sample was 170 insurance professionals, 55 personal motor, 52 personal home and 63 commercial property. The respondent must spend 30% of their time in underwriting-related activities for a given line to be assigned to answer questions specific to that insurance line.

Tim Kelly

Tim is a highly qualified Independent Engineer with over 20 years experience as an Engineering Assessor of damaged vehicles.

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