Data enrichment is a ‘great opportunity’ for insurers to ‘sharpen their pencil’

Data enrichment can provide “a great opportunity” for the insurance industry ahead of the FCA’s pricing reform deadlines because it can help brokers and insurers “add value” for end customers by paying “more attention to loyalty and renewals”, said Jeffrey Skelton, managing director of insurance, UK and Ireland at LexisNexis Risk Solutions.

He explained: “There’s an opportunity for the industry to use data enrichment at renewal, which is something that’s not commonplace across the market, but that will create a levelling – which is I think what the FCA is after – not having such a disparity between new business and renewal.”

The FCA’s pricing reform proposals are primarily designed to tackle price walking, the practice whereby new customers are offered more competitive premiums than long-standing insurance customers.

Following an industry-wide consultation, which concluded in January, insurance businesses have until the end of September 2021 to accommodate the regulator’s recommended systems and controls rules as well as product governance rules. Pricing and auto-renewal remedies will need to be implemented by the end of the year, alongside new reporting requirements.

Skelton explained that because the FCA is asking the industry to take a “harder look” at making sure there is price equity, data enrichment will allow insurers to deliver “accurate” cover.

However, “the big gap is with the brokers right now, because a lot of them don’t have access to [data enrichment] information”. 

Data enrichment requires customers to consent to sharing their information and records. James Burton, senior director of product management, UK and Ireland at LexisNexis Risk Solutions, said: “There’s a groundswell of opinion and I think it’s accelerating as the years go by, where consumers want a return for their data.”

Skelton added: “It will come down to the insurance companies as they look at that data, asking themselves – what kind of new products can I deliver in the market that are more heavily based upon the usage of that information?

“[This is a] great opportunity for the insurance companies to sharpen their pencil because the data will be there. The question is, will they have the appetite to prove enough premium relief that the consumers will bite?”

Data melting pot

To better support brokers in accessing data, LexisNexis Risk Solutions launched its new Broker Intelligence solution during Biba’s two-day annual conference in May - this enables brokers to view a range of data attributes about a person at the point of quote or renewal.

The company’s data resources in the UK and Ireland comprises of 54.4m identities and 2.3bn records from over 30 data sources – this is combined into “one big melting pot” to give customers a “holistic market view of consumers’ policy behaviour”, explained Burton.

The solution was designed to help small to medium sized UK brokers price more effectively, cut operational costs, improve the customer journey in personal lines and to help build resilience.

Through one gateway, brokers can develop an assessment of risk built on policy history, such as gaps in cover, cancellation insights, claims history, public records, third party credit history and financial sanction records.

Skelton added: “It’s an opportunity for the insurance company to get a 360 view of claims experience [and] risk exposure – but across the market, not just in a little silo.”

Monitoring customer behaviour through this type of highly granular data will ensure “fairness” and “open the door for a rich conversation”, noted Burton.

Insurtech Concirrus’s chief executive Andy Yeoman added: “Our view is that there is a change quietly happening in the insurance industry, which is moving from a people and process, knowledge, power business, to one of data and analytics.”

Covid learning curve

The Covid-19 pandemic has also influenced how data can be used within the insurance industry.

Burton said the sector has learned a “huge amount” during the pandemic about how people and industries are mobilised, as well as how to “respond effectively”.

He continued: “It’s only as you go through these experiences that you fail fast, but you learn from those failures and you make improvements as you move on - and that’s underpinned by data.”

Giving an example here, Burton explained: “I’m looking at the risk of this person, I’ve noticed that they’ve got a gap in cover but actually it was during the pandemic – let me treat that customer differently, they might be under some financial stress, or it might have been a legitimate reason.”

Burton also emphasised the importance of “the broker approach” in conjunction with data use.

He said: “I don’t think you can underestimate the value that brokers bring to this market. They have their finger on the pulse of what customers need, what customers think they need and [know] the best products for the requirements of the customer. I think that human interaction is super important. 

“You cannot beat the broker approach.”

Skelton added that “the role of the counsellor is critical”.

He continued: “There’s going to be a great opportunity for the insurance industry to educate consumers about the importance of having the right kind of coverage [and] the right amount of coverage.”