It is little surprise that flexibility in insurance products is becoming fundamental to meeting changing consumer needs. For instance, not everyone wants or needs an annual insurance policy. Take motor insurance, for example. The way people are using their vehicles has altered, and not just as a result of the pandemic and the current cost of living crisis. This change has been happening gradually over the last twenty years[i].

However, perhaps the last two years have made people think differently about car ownership. This seems to be borne out in a study LexisNexis Risk Solutions undertook with Consumer Intelligence into the awareness and opportunities that exist for the sector in non-annualised policies – or NAPs[ii]. These types of policies are typically used to borrow someone else’s car, to support gig economy work and to keep mileage low on another household vehicle.

Our study has raised some important questions about how insurance providers can capture a clear opportunity that exists in flexible, short-term products, overcoming the dearth of risk data currently available for this sector of the market.

We found that over a third of drivers (36%) who have never used a NAP would be interested in buying a non-annualised motor insurance policy in the next 12 months[iii]. We also found that pay-as-you go type policies are the most likely to receive take up. While only around 15% of consumers are using (or have used) one or more NAPs at some point during the past two years, awareness of these products is high[iv] – in fact around 90% of the people surveyed had heard of one of these products.

Insurance providers exploring this space could be pushing against an open door. The next question is how to overcome the issue of data deficiency. There needs to be greater intelligence on who is using what NAP products and why, to help offer the right product at the correct price and reduce the market’s exposure to fraud. The sad fact is that some determined criminals take short-term policies with the deliberate intent of committing claims fraud.

Insurance providers need information related to the vehicles being insured, the individual applicants’ driving and claims histories. They need to understand the fraud risk related to the individual, including the risk of fronting. This range of information would be valuable to support decisions around how products are designed, how they are marketed as well as to help inform the application, underwriting, pricing, claims, security and other processes.

The good news is that much of this data is already available to the market to support annualised policies. The gap that remains is intelligence specifically on NAP users. This is where industry collaboration will be needed for the creation of a contributory NAP database.

The insurance market has told us they are hungry for NAP data. As the industry’s data and advanced analytics provider, we will work hard to make this happen. As an industry, we need to work together to help ensure those consumers and small businesses that need access to flexible policies can do so with more choice, greater ease and at a fairer price.

Read more about our research here, in the first of two White Papers on Non-Annualised Policies: https://risk.lexisnexis.co.uk/insights-resources/white-paper/a-consumer-study-motor-insurance-non-annualised-policies

[i] https://www.gov.uk/government/statistical-data-sets/nts01-average-number-of-trips-made-and-distance-travelled

[ii] LexisNexis Risk Solutions partnered with Consumer Intelligence to survey more than 2,000 UK consumers, to assess levels of awareness and understanding of different types of NAP, reasons for their use; and consumers’ experiences when applying for and using these products, June 2022.

[iii] LexisNexis Risk Solutions partnered with Consumer Intelligence to survey more than 2,000 UK consumers, to assess levels of awareness and understanding of different types of NAP, reasons for their use; and consumers’ experiences when applying for and using these products, June 2022.

[iv] LexisNexis Risk Solutions partnered with Consumer Intelligence to survey more than 2,000 UK consumers, to assess levels of awareness and understanding of different types of NAP, reasons for their use; and consumers’ experiences when applying for and using these products, June 2022.

Content provided by Andrew Ponter, insurance product manager, LexisNexis Risk Solutions, U.K. and Ireland