For insurers monitoring the impact of claims inflation on their operating profits, policyholders feeling the pinch of rate increases and brokers serving as the go-between there’s nothing perfect about the “near perfect storm” of factors currently facing the motor insurance market.
Providing insight into the key trends sweeping the motor insurance sector, Tom Lawrie-Fussey (pictured), senior director of product management for UK and Ireland insurance at LexisNexis Risk Solutions, highlighted how the impact of claims inflation is interconnected with the cost-of-living crisis. Interestingly, he said, when you zero in on the trends impacting the vehicles themselves, two themes develop. The first of these is the emergence of new tech, particularly around EVs and self-driving technologies.
“With new cars comes a huge amount of complexity that the insurers need to know about because they need to work out the benefits for potentially avoiding collisions, but then also the inevitable repair costs if that car is involved in a crash,” he said. “But because of the cost-of-living crisis, we also see an increasing trend of people keeping their older cars when they can’t afford to upgrade.
“The average age of UK vehicles on the road is 9.1 years now, which I think is the longest it’s been for quite some time. So, that’s another factor where people are now questioning, ‘OK, what’s the bare minimum that I now need to do to keep my vehicle on the road legally’, as opposed to looking at everything they can potentially do to make that car as safe as possible.”
Insurers need to be experts in both the competing trends of new vehicle complexity and the ageing of the UK car park, he said, because they need to keep in touch with what they’re writing in terms of the policy book. But for Lawrie-Fussey, the crucial headline that interconnects these trends is that insurers need to understand the ‘metal’ (i.e. the vehicle itself) they’re insuring, regardless of whether it’s a new car or not.
“Traditionally, insurers have been able to focus more on the individual, and better understanding you and me in terms of our profession and age and experience etc,” he said. “But I think now the insurance sector realises that it’s getting to a saturation point with regards to that knowledge. There are not really many more questions that they can ask of you and me to get an even more granular view of our potential risk.
“But the vehicle – it’s not that it’s been neglected- but it is where the opportunity now resides. Insurers know enough about [you and me] but what they don’t know enough about is the vehicle, its complexity, what its maintenance requirements are and where we are on that journey in terms of having a safe and low risk vehicle on the road.”
He noted that it is recognition of this opportunity which led to the development and launch of LexisNexis Risk Solutions’ new vehicle data solution - LexisNexis Vehicle Insights. First announced in February, the firm invited motor insurance providers in the UK to test the new solution before its official rollout in June. Essentially what it does, he said, is it offers providers much more granularity on the metal they’re insuring by offering them access to a holistic range of data sources which plug into their workflows.
Examples of some of these data modules include its ‘Vehicle Passport’ functionality which combines past vehicle advertisements as well as MOT history and keeper changes – forming a complete picture of the vehicle’s history to date to support claims and underwriting teams. Its ‘Vehicle Status’ tool provides real-time data into a vehicle’s current status, including validation of MOT and road tax.
The ‘Behavioural Intelligence’ data module enables insights into the risk profile of the policyholders themselves, he said, based on their vehicle management habits. Meanwhile, the ‘Vehicle Valuer’ data allows providers to form policies more accurately while streamlining the application process and supporting a better claims experience by offering insight into current mileage and valuation information for all registered vehicles in the UK.
It’s about going above and beyond the basic information traditionally available to insurance providers, he said, and from conversations across the market, he knows providers are now looking for every advantage when it comes to leveraging their data.
“Normally, you can type in your number plate when getting a quote and it will pre-populate some data fields which is handy from a user experience perspective,” he said. “But there’s still a big gap [for the provider] between that status and truly knowing the history of that individual car (or motorbike or van) and the real-time value of it.
“There’s still a lot of information that providers are blind to at the moment so we’re trying to pull all of those things together. And the key thing is not only serving up this information, but doing so in a way that they can action it. If you think of the point-of-quote process, it’s incredibly fast, we’re talking milliseconds in terms of response times, particularly if you do go down a price comparison website journey where everyone’s effectively fighting for the same business.”
Providers don’t just need access to new granular insights, he said, they need these to be delivered in an accessible format that can be quickly understood and actioned. Simply collating huge amounts of raw vehicle insight information isn’t the answer. So, the challenge for Lawrie-Fussey and his team is that of compressing the information compiled from its vast array of data resources swiftly and in a format providers can immediately plug into their pricing models and business systems – allowing them to generate quotes that take all that data into account while still delivering on time.
Identifying the key next steps for the team, he noted that the firm already has a host of clients sending along their historical numberplate data sets for analysis. It’s great to see the level of interest from clients already, he said, and he fully expects that after this testing period, the team will have clients live on its platform.
“There’s an urgency factor here,” he said. “We know we cannot afford to price policies blind to this granularity on the metal. We need to know about the metal and we need to know it now.”
