The Knowledge: Personal lines motor – The big story

Insurers are responding to challenges in the motor market by racing to be the best at customer profiling and risk pricing in an effort to improve profits in personal motor.

With overall market COR at 106% in 2011, the game for insurers is to be one of those below 100% pulling the average down, rather than above 100%, pushing it up.

“It’s a battle in the market to have the best counter-fraud activity, knowing the fraudulent customers will go to the weakest link in the chain,” says AXA’s lead underwriter Jon Byford.”Nobody wants to be the weakest link.”

Customer data analysis

Behind the scenes in their direct operations, insurers are stepping up customer data analysis, ID checks and other validations, to catch out the liars and ensure they are pricing risk appropriately. The counter-fraud mentality is also playing its part in driving changes to distribution arrangements in personal lines.

Deloitte partner Ian Clark says: “The biggest changes going on are around point of sale, before the customer is taken on for the first time. The guy you’re insuring for an Aston Martin - you credit check and it tells you that he’s bankrupt, therefore do you really want to take this guy on, on a high-value car? There’s a higher probability that he might bend it or burn it because he’s got no money.”

Automatic checks

Automatic checks kick in when a customer starts supplying information for a quote. They include validating driving licences with the DVLA and checking claims histories with the Claims and Underwriting Exchange, as well as analysing job roles (teachers are a safe bet, nurses less so); scanning driving routes for known accident black spots; and using Google Maps to pinpoint garages - or a lack of them.

“What it does mean is that insurers reject a lot more people or, alternatively, they ask for additional premium before they take them on cover,” Clark says.

The danger for brokers is that, as the defences around insurers’ direct quoting systems get stronger, riskier business may drift toward them.

Aviva head of broker personal lines Brian Spinks says: “Brokers used to eyeball the client. So much is internet-based now that people feel they can tell a lie. We’re interested in working with brokers who invest in upfront fraud prevention. We want to invest capacity with the brokers who do it.”