Is the industry doing enough to assist vulnerable consumers, and whose responsibility is it to ensure that there are no gaps in the provision of legal/insurance services to consumers?
By using data to understand more about the risks they are insuring and customer behaviour across all channels, insurers can provide the most accurate, tailored price for that individual.
Such insight has proved particularly valuable in the detection of pre-inception fraud. Solutions such as SSP Verify enable insurers to identify in real-time individuals who are manipulating their data, so their applications can be investigated further. With this intelligence at the point of quote, insurers can focus on their quality clients, writing the risks they wish to write at the correct premium and decline risks that are clearly suspicious.
Consumers are also benefitting from the plethora of data available at the point of use. Telematics devices enable policyholders to improve their driving style, while sensors can provide advance warning of water leaks before serious flooding takes place. Such proactive measures mitigate the losses for policyholders and reduce the amount/severity of claims for providers.
As is often the case though, things are not quite so clear cut. The ultimate aim is to identify an individual and insure a segment of one, where enough is known about a particular risk to provide a price just for them. However, with greater and greater segmentation comes the potential to create an uninsurable underclass, where some small aspect an individual is unaware of makes them an undesirable risk.
Consequently people should take steps to manage their data footprint in a similar way to their credit score.
Yet there are also issues for the industry itself to consider. While the historic basis of the fortunes of the many covering the misfortunes of the few has worked for centuries, pricing purely on an individual basis may lead to the risk being shared with only a couple of others. This could change the fundamentals of insurance, leading to cover being unaffordable.
We are already seeing new peer-to-peer models taking insurance back to its collective roots. Guevara offers motorists the opportunity to join with other like-minded drivers to potentially reduce their premiums, while Bought By Many enables individuals with a specific insurance requirement to join a group with similar needs to obtain a cheaper policy.
With continued industry disruption inevitable, insurers need to continue to make the most of the available data to accurately price risks while taking care of the collective.
This article first appeared as an editorial in Modern Claims Magazine issue 20
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