Brokers have shown immense resilience and adaptability in response to the pandemic. While the industry is facing disruption on many fronts, according to a recent report by PwC and CBI[i], the insurance market is the most optimistic of all the financial services sector. Furthermore, brokers have led other financial services sectors in their use of AI and data analytics to improve customer understanding and interaction[ii].
Our experience certainly reflects this research. Brokers are hungry for data solutions to help manage the impact of the pandemic, changes in customer preferences and behaviour and the acceleration of digital technologies. Brokers know that in order to keep pace with shifts in customer expectations, data can help them understand what customers really want. As BIBA[iii] has stated in response to the FCA’s pricing review, price is not the only consideration. Insurance brokers can advise on the level and breadth of cover suitable for customers, using, as the FCA suggests, innovative solutions to compete.
All these factors have deepened the demand for more data insights to help brokers feel more informed when communicating with new or existing customers.There has been a greater focus on customer segmentation using data enrichment to respond to the individual needs of customers, identifying cross-sell and add-on opportunities such as key-cover, as well as spotting the market potential for new propositions.
Brokers also understand that segmentation is most successful if you start with a single customer view – knowing Mrs Smith from High Wycombe buying household insurance is the same Mrs Smith insured on a motor policy 3 years previously. Linking and matching technology can provide that single customer view and we’re anticipating strong interest in LexID®, our unique identifier from the broker market in 2021.
Focus on buying process
While the demand for data is deepening, the shift to data driven decisions was happening well before 2020. Brokers have looked to data to help them validate, verify and assess risk with greater accuracy. In essence it means fewer questions at application stage, reduced referrals, greater pricing accuracy and a smoother customer experience. Going forward, we believe the focus on the buying process will increase, particularly in household. Brokers will want to make the process swifter for the customer but given the stresses on household finances, they will want to ensure through the question set that they have the appropriate cover for their needs rather than the bare minimum. In tandem, the use of affordability assessments to help determine payment options for premiums is set to grow.
More broadly, brokers are seeing the value of data insights that are directly related to an individual’s insurance history. They understand they will gain the most holistic view of an individual using data that is derived from past policies, past claims, past quoting behaviours in combination with other predictive data sources. This will help to improve their opportunities to quote and place business on behalf of their panel.
New attributes in relation to COVID-19 are the latest innovation to come from policy history data that will enable brokers to factor for changes in policies such as cancellations and gaps in cover that were a direct consequence of the pandemic.
The next step in the use of insurance specific data to better understand customer needs is industry contributed claims data. This will not only be valuable for pricing but as an opportunity to engage with the customer to help them reduce the risk of a claim in the future. This is starting in household followed by motor and commercial.
Getting on the front foot to help customers mitigate risks based on known prior claims or future extreme weather events plays very much to the role of the broker. For example, through geospatial data visualisation tools brokers can understand impacts from weather events enabling them to be much more proactive with their insurer partners, policyholders and third party suppliers.
The risks of deliberate or unwitting fraud such as fronting also need to be mitigated and brokers will have a strong opportunity to support customers who have cut the number of cars owned by the household and adding named drivers to policies, through named drivers insights now being delivered into the market.
Finally, vehicle-derived data insights – both on the presence of Advanced Driver Assistance Systems (ADAS) and on how the vehicle is driven are also set to give brokers a competitive edge. It is easy to see how insurance pricing reflecting the safety features of the car will have appeal to consumers as ADAS equipped vehicle volumes grow. Tapping into the demand for usage-based insurance will also be key – not just as an outcome of the pandemic but to price customers more fairly and the potential safety and claims benefits.
There is no shortage of data insights and no shortage of possibilities for brokers who have grasped the opportunity to bring data into their workflows and evolve their propositions to meet the changing demands of their customers today and tomorrow.
Martyn Mathews, Senior Director, Personal Lines, LexisNexis Risk Solutions