ILC ARTICLE

‘Something has to change’

26th October 2021

New data has revealed a staggering £2.5bn reduction in claims last year, with motor premiums also significantly down as drivers made the shift en masse to new mileage-based policies. 

This was revealed during the Exclusive Motor Claims Conference, an ILC event hosted in London’s Landing FortyTwo. 

Speaking during a session entitled, ‘Piecing the jigsaw together’ Matt Scott, co-founder, Insurance DataLab, said, “Insurers are not making much money from their core product anymore. We don’t know whether claims will go back to normal next year, but something has to change because not enough money is being made.” 

Meanwhile, with Fair Value coming in, which will measure insurers exclusively on the value for money of their service, he warned insurers against implementing cost-saving measures in customer service. He said that while this may produce immediate results, the long-term effects would be damaging. 

He said, “Insurers can’t afford to let these reductions in profit impact customer service. If they do that, the insurers that get it right will be able to cherry-pick the best customers.” 

Selection 

Picking the best customers is exactly what new telematics-based insurer Kudo has been established to do. It requires customers to take a driving test before being offered a policy. They need to score high enough on that test to qualify, but the policy offer will then be based directly on their driving ability. 

Chief claims officer Stuart Ballantyne said, “The principle is most insurers only find out the bad drivers after they’ve taken out cover. We’re hoping only to take good drivers on cover.” 

This new approach is part of a wider strategy of putting claims at the heart of the business model. Claims, he says, is central to the proposition and if insurers want to thrive in an ever-increasing marketplace they need to recognise the business-critical role the claims department plays. 

Stuart said, “Claims people have to be the smartest people in the room because their job is to understand claims inflation and beat it, but beat it predictably so we can build it into price and attract more customers on the back of that. You beat it through a combination of better people, better processes, and better technology. 

“If we say claims inflation will be 10%, then ours has to be as six or seven or eight per cent. The worst thing you can do as a claims director is say we’re going to be at 10% and come in a seven per cent, because then you’ve lost three per cent pricing opportunity.”  

Analytics 

Getting these predictions right was difficult before the pandemic but is next to impossible now. The surge in available data can go some way to turning this art into a science, but to make the most of it, it needs to be correctly harnessed. 

Stuart said, “Claims needs to take ownership of technology. We can’t have analytics done to us. We need to win the argument to make sure analytics and data science is within our structure, so the numbers experts are also the claims experts.” 

Tom Helm, head of claims consulting, Willis Towers Watson, agreed that better use of technology was critical. He urged insurers to look beyond their own sectors for examples of good tech creating efficiencies, and either implement similar solutions or partner with those who can.  

Matt echoed that. He said, “Collaboration outside the industry is going to be key. New players coming in could be a threat, but they could also be an opportunity so insurers need to be open to new partnerships. And they need to remain agile enough to take these opportunities. There has been huge change during the pandemic and we’re in a bit of lull at the moment, but there is more change to come.” 

The inaugural ILC Exclusive Motor Claims Conference was supported by headline sponsor Enterprise Rent-a-Car; sponsors eBay, Solera Audatex and Synetiq; as well as corporate partners AkzoNobel, Autoglass, CAPS, Carpenters Group, Copart, Davies Group, e2e Total Loss Vehicle Management, Entegral, Enterprise Rent-A-Car, GT Motive, Hills Green Parts Specialists, IAA, Innovation Group, S&G Response, Sherwin-Williams Automotive Finishes, ThingCo and Verisk.