Claims data could tackle exaggeration temptation

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The home insurance market should continue to deliver an excellent claims service as part and parcel of a more personalised service based on the needs of the individual 

Carla McDonald 
Senior vertical market manager 
LexisNexis Risk Solutions UK and Ireland

Although the home insurance market has experienced relatively healthy levels of growth and competition in recent years, there are a number of dynamics now at play that may drive the demand for a greater level of insight about the customer during the claims process.

Home insurance fraud has risen—Aviva recently reported that the proportion of home insurance claims that were rejected for fraud grew by 26% in 2020.

Insurance providers always have the threat of extreme weather front of mind—the terrible floods across parts of Europe provided a stark reminder of the impact of such events and the storms at the start of 2020 resulted in insurers paying out more than £360 million to help customers recover.

The home insurance market will also be conscious of the boom in house moves over the last 18 months—home moving being a key trigger for home insurance purchasing. Half of buyers who agreed a sale between March 2020 and June 2021 say they regret how much they paid for their properties. These customers will undoubtedly be looking for cost-savings and value when they shop for cover.

We must also consider the impact of the new pricing rules on claims. As insurance providers will need to align renewal pricing with new business pricing, differentiation in products and service delivery may become more important and this may heighten pressure on home insurance providers to further enhance the claims experience for customers. 

With these issues in mind, we set out to understand more about the home insurance customer, what motivates them to stay or switch, and what their attitude is towards home insurance providers, premiums and claims experiences*.

The research of more than 3,000 home insurance customers uncovered that two in three consumers think it is acceptable to manipulate the information they provide when using price-comparison websites in order to gain a lower quote for home insurance.

Around half of individuals who have recently filed a claim are more likely to consider adjusting or exaggerating in future in order to get a larger payout, and nearly nine in 10 of the same group think home insurance providers seek to avoid paying out on claims at least some of the time. As Aviva’s experience has shown, these fraud risks have increased as a result of Covid-19.

It could be the negative perception of insurance providers that explains why customers do not file claims against their home insurance policy very often. Nearly half (46%) of homeowners have never filed a claim and a quarter (24%) did so more than 10 years ago. The main reason for this is likely to be distorted perceptions versus reality; 79% of those who have never filed a claim stated that they believe their premium would increase as a consequence. In reality, 42% of the premiums stayed the same*. 

On a more positive note, around seven out of 10 choose to renew with their current home insurance provider after filing a claim despite the worry about a premium increase.

Although most consumers (about seven in 10) feel the cost of their home insurance is “average or about right”, a third of consumers say they shop around if their circumstances have changed or if they feel their renewal premium is too high.

More than half (55%) of customers that switched provider stated it was due to finding a cheaper premium elsewhere, 29% because their premium had increased in a year. Only 5% said the reason was down to negative/poor prior claims experience.

One of the best ways for the home insurance market to counteract negative perceptions and reduce fraud risk is by continuing to deliver an excellent claims service as part and parcel of a more personalised home insurance service based on the needs of the individual.

Access to accurate and comprehensive prior claims information about the individual and the property from the whole of the market will enable claims professionals to feel far more informed when managing claims, putting them on the front foot for spotting potential fraud, while helping to ensure claims are expedited.

This data has benefits throughout the customer journey. It starts with pricing by helping insurance providers to deliver accurate quotes based on a much clearer understanding of the risk, but ultimately it could also reduce the temptation to commit fraud, improve the detection of fraud, and result in better outcomes for insurance providers and consumers.

* LexisNexis Risk Solutions was not identified as the sponsor of this research, which was based on an online survey of 3,083 residential homeowners and renters (including 1,576 homeowners and 1,507 renters). The research was completed during 2019.
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