With winter now well and truly here, even the best-intended environmental resolutions from last year’s COP26 won’t halt the flow of climate change-related home insurance claims. As householders brace themselves for more inclement weather, insurance providers have a responsibility to ensure that their products are accessible and that consumers are covered for the worst winter can throw at them. But against this backdrop, application and claims fraud remain a big challenge for the home insurance market.
LexisNexis® Risk Solutions research, has shown that 63% of home insurance shoppers use price comparison websites to ensure they get the best price. Alarmingly though, two-thirds of consumers think it is somewhat, or completely acceptable to manipulate the information they provide to these sites to keep the price down. Misstatement of prior claims – stating one past claim for example when there have been three – is perhaps one of the most common forms of quote manipulation.
Whether a misstatement about a past claim was intentional, or simply human error, omitting this information can leave householders vulnerable to the policy being void at claim and insurance providers open to opportunistic fraud. To illustrate that point, the ABI recently reported that last year the domestic property market saw £57,153,000 of opportunistic claims fraud, which made up 96% of all claims fraud across the home market in 2020.
As the season for weather related home insurance claims fast-approaches, how can the industry turn the tide on the perennial problem of opportunistic fraud and in doing so help ensure genuine customers get the fair treatment and accurate pricing for the risk they represent?
The next evolution is industry contributed, highly granular claims data for the home insurance market. This would enable insurance providers to clearly see the frequency and value of flood, storm or wind-related claims for the individual and the property at the point of quote. Not only would this lead to speedier, fairer quotes, but by using readily available granular data to pre-fill and pre-validate claims details, the risk of underinsurance is reduced.
Climatic changes and their knock-on effect on our weather are not the only environmental factors that the insurance market needs to respond to. Lifestyle changes due to the pandemic are also a massive consideration. Historical claims data could help identify these trends and allow insurance providers to respond accordingly. For example, burglary claims have dipped since COVID-19 due to more people being at home, but there is an upward trend in accidental damage claims. With more homeworkers than ever before, it’s not surprising there has been a rise in spillages on computers and breakages.
But how to distinguish the genuine from the fake? Claims data from a contributory database would allow for a clearer view of all the claims an individual may have made and more specifically the loss causes associated to that claim. As well as helping identify potentially fraudulent claims, using granular data in this way could aid in automating decisions for low-risk claims, speeding up pay outs for genuine customers in a compassionate and timely manner.
In fact, a contributory claims database could play a big part in helping to meet changing consumer expectations in a post-COVID world. Consumers have always demanded a quick online journey from quote to policy, together with a well communicated, smooth claims process, and rightly so. COVID has heightened these expectations.
By supporting online decision-making, contributory data helps speed up the customer journey at the front end with pre-fill and pre-quote validation of claims information. The value of this data for pricing can only heighten as the home insurance market adopts new pricing practices. The FCA has stated that if insurance providers do not have sufficient information to satisfy themselves that a renewal contract is consistent with a consumer’s demands and needs, they will need to obtain and consider that additional information before proposing a renewal. Contributory claims data can offer a new way to look at the risk when accessed alongside a wide range of additional data sources, crucially from a single platform, for swift risk assessment and quote process.
As our environment transforms, so do the challenges presented to the home insurance market. Climate change, economic challenges and the pandemic are just some of the ever-evolving circumstances that the insurance market needs to adapt to. Insurance needs to remain constant, to offer affordable cover at the fairest price while balancing risk to be fair to all consumers. As we head into 2022, granular home insurance claims data could become a key ally in helping the market reach this objective.