The role of contributory databases in helping the insurance market assess risk cannot be overstated
The sharing of data between insurance companies, government and enforcement agencies plays a vital role in combatting fraud, what more do you think can be done in this regard?
The role of contributory databases in helping the insurance market assess risk cannot be overstated.
Back in 2014, a contributory database was created for the motor insurance market to share policy history data. 6 years on, this data gathered from over 85% of the motor market is now enabling data scientists to find correlations between an individual’s past policy behaviour and the risks of cancellation mid-term, their likelihood to claim and the cost of that claim. Quote behaviour data (gathered for over half a decade) is bringing a further layer of understanding to those risks, including the risk of fraud.
A good example is named driver fraud. Until recently, very little validation was done at quote on named drivers compared to the main driver. Applying data enrichment, using policy history and quote behaviour can help motor insurance providers spot applications that need further investigation, and price base on a much clearer understanding of the full potential for loss.
Understanding application fraud risk based on an individual’s email address is also now possible. This is based on billions of transactions from global payment processors and other online industries. Insurance providers will soon have access to a point of quote risk score to help assess the validity of the individual’s Digital ID. Using just their email address information provided on the application, the insurance provider will be able to understand if the email address exists, whether the domain it comes from exists, the age of the email address in days and any links the email address has to a valid social media account. This information will help create a picture of whether the application might be fraudulent.
The next step on this journey is contributory claims data. The ABI’s annual fraud figures 1 underlined the valuable role data enrichment has to play in assessing risk and detecting fraud at the application stage as well as the huge potential of centralised claims databases for use at quote and at claim. That database for the home insurance market is being built right now, with motor to follow.
As well as understanding whether a customer had a prior claim or not at the point they apply for insurance, the insurance provider will be able to understand the specifics of the claim, when it occurred and how much it was settled for. Valuable for pricing, it will also show how a new claim ‘fits’ with what may have happened in the past. This will help inform the potential treatment strategy for the current claim and flag any potential of fraud.
Martyn Mathews, Senior Director, Personal Lines, LexisNexis Risk Solutions
Read more from Martyn Mathews here: New Year, New Customer Expectations