The UK insurance market needs to adopt digitised and more efficient underwriting capabilities or risk losing out to new, more automated players, according to a new study by LexisNexis Risk Solutions1. The comprehensive study based on feedback from 107 insurance professionals and detailed in a new White Paper, published today (13 June 2017), found just 4% of personal lines insurers claim to be all or nearly all digitised, yet 92% believe that digitisation has allowed new types of insurance to emerge and disrupt the market.
In a sector under severe price pressure, LexisNexis Risk Solutions found that 31% of motor insurers are using mostly manual processes for quoting, applications and claims, meaning these operators are missing out on all the efficiency gains and potential for improved pricing accuracy through automation. In home insurance, the picture is only slightly better with 25% of insurers using mostly manual processes rather than a mix of manual and digital or all digital.
However, looking at different elements of the customer journey, levels of automation and digitisation are currently highest in applications, (73% of motor insurers and 81% of home insurers said their application process was digitised) while quoting was the least suggesting insurers have invested in smoothing the application process as the priority. And this remains their priority with 65% saying the application process is their key focus for digitisation.
One reason for the higher proportion of application automation in motor and home insurance could be that many of these insurers are already exploring the benefits of using data prefill which works by providing critical information at the initial point of contact with the customer, using just their name, address and date of birth as data points. This not only improves the customer experience by already having key information filled in for them, it helps the insurer quickly and more accurately assess risk before quoting a policy.
Selim Cavanagh, Vice President, Insurance, UK, at LexisNexis Risk Solutions said: “While less than half of the insurers surveyed (44%) are currently interested in improving digitisation in underwriting specifically, overall insurers see digitisation as offering big advantages, with improved speed to market for new products the top benefit for 78% of respondents. Furthermore 66% see digitisation leading to better customer retention rates, operational savings, an enhanced customer experience and access to new markets. Policy history data at point of quote is a good example of this with 64% of insurers seeing this as in important way to improve the customer journey.
“The General Data Protection Regulation (GDPR) is going to be a key focus over the coming year and insurers are still encountering the switching behaviour of customers in a digital world that makes competition even greater. As more and more UK InsurTech startups break through the traditional insurance landscape, insurers must integrate highly digitised and more efficient underwriting capabilities into their overall digital strategy.
“In the last few years alone, it’s clear just how much digitisation is helping make life easier for insurance professionals: fewer time-consuming manual tasks, lower operational costs, less chance for human error and improved pricing accuracy, to name a few of its benefits. And the results of the study confirm the prevailing attitude, with most insurers agreeing that they feel increasingly positive about digitisation. It will help them become slicker at making underwriting decisions leveraging data at point of quote, smarter at understanding their customers and easier to do business with.”
LexisNexis® Risk Solutions harnesses the power of data and advanced analytics to provide insights that help businesses and governmental entities reduce risk and improve decisions to benefit people around the globe. We provide data and technology solutions for a wide range of industries including insurance, financial services, healthcare and government. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information-based analytics and decision tools for professional and business customers. For more information, please visit LexisNexis Risk Solutions and RELX.
1 Research Methodology. Using a mix of online panel and telephone interviews data was collected from 107 insurance professionals, who all answered questions specific to their insurance line. To take part in the survey they had to spend at least 30% of their time in underwriting-related activities. The results showed that the majority of respondents spent over 80% of their time pricing and underwriting policies.
LexisNexis was not identified as the sponsor of the study (conducted January 2017).