The extent of the challenge that home insurance providers confront in pricing insurance accurately and reducing exposure to fraud has been revealed in a study from LexisNexis Risk Solutions of more than 3,000 UK homeowners and renters.
The data, analytics and technology provider for the insurance sector found that two in three of the homeowners and renters surveyed felt it was fine to manipulate the truth to get a cheaper quote online, with Association of British Insurers fraud data suggesting this typically consists of non-disclosure of previous claims.
The research from LexisNexis Risk Solutions also demonstrates that there is an urgent need for home insurance providers to know more about past claims related to the individual and the property—for use at pricing and underwriting as well as to support the claims process. This insight could become more important to help tackle any rise in fraud resulting from the pandemic and as the market prepares for the Financial Conduct Authority’s (FCA) pricing remedies
The research detailed in the whitepaper, ‘A Clearer View of Claims to Help Fight Fraud’, found:
- Two in three consumers think it is acceptable to manipulate the information they provide when using price-comparison websites in order to get a lower quote for home insurance.
- About half of consumers who have recently filed a claim are more likely to consider adjusting or exaggerating a future claim in order to get a larger pay out.
- Nearly nine in 10 consumers who have filed claims recently think home insurance providers seek to avoid paying out on claims at least some of the time.
- Consumers who have recently filed claims and subsequently see their premiums increase are more likely to say it is acceptable to manipulate information.
Neill Slane, senior manager for claims in the UK and Ireland at LexisNexis Risk Solutions, said: “Home insurance is a highly competitive line of business with very little movement in premiums over the past seven years. Insurance providers need to differentiate themselves in pricing and claims, as well as tackle the common misconception identified in our research that they actively try to avoid paying out claims at least some of the time.”
“Understanding and applying this insight has become even more important with the FCA’s new pricing regime on the horizon and in recognition of the fact that in times of economic hardship, individuals under financial stress may be tempted to exploit opportunities to commit fraud. This could be not declaring a past claim for a cheaper quote or exaggerating an accidental damage or weather-related claim.”
“Fundamentally, home insurance providers need a much more granular understanding of past claims to help inform every part of the customer journey to improve pricing, underwriting and claims processing, as well as reduce fraud risks. The market-wide claims contributory database we are now building will offer that level of insight, providing the basis for building a faster, more seamless quote and claims experience, and as a means to boost fraud detection.”