Claims inflation is skyrocketing in the motor and property arenas—but why?
And how data can help insurance providers improve efficiencies, reduce costs and enhance the customer experience?
We ask Kajal Vakas (pictured), senior manager, claims, LexisNexis Risk Solutions, Insurance, UK and Ireland.
CM: What do you see as the main contributory factors to claims inflation in motor insurance?
KV: Global issues are having a trickle-down effect on claims inflation. We are still feeling the effects of the lack of vehicle production during the pandemic, and more recently, the Russia/Ukraine conflict delaying production of many car parts. Meanwhile, Brexit has impacted the available workforce, so as well as seeing parts inflation, labour costs have increased, too.
The hike in energy prices is hitting workshop operating costs, which have to be passed on. Add to this, the delay in obtaining parts means that a courtesy car is needed for longer and is also more expensive to hire due to the lack of available vehicles. It’s perfect storm for claims inflation.
CM: How much do you think advances in car technology plays a role in increasing claims costs and what role could data play in understanding and managing these costs?
KV: Advanced driver assistance systems (ADAS) are present on more and more vehicles, from premium through to budget models. These new technologies require more specialist skills and can cost more to repair. There is a huge shortfall in qualified technicians, meaning that repairs are done in fewer workshops, therefore extending the claim cycle.
As vehicles are manufactured with greater safety technology, however, we’d expect to see reduced claims frequency, especially for collisions. The value of ADAS data (which is now available at VIN level through LexisNexis Vehicle Build) in determining trends between vehicle type, ADAS on the car and collision type would help build a picture of how different ADAS features may support a reduction in accident risk.
Overlay this with loss location hotspots and driving behaviour and a powerful data set could be created in both claims prediction and prevention.
CM: How is the property insurance market being affected by claims inflation?
KV: Once again, the pandemic and Brexit have affected the labour market and supply chains for property repairs. Economic sanctions due to the war in Ukraine and skyrocketing global energy costs are also increasing the cost and time spent on repairs.
Of course, climate change is directly affecting claims frequency and severity too, with more properties now facing losses due to windstorm events and flooding and issues such as subsidence.
This all underlines how critical it has become for insurance professionals to leverage real-time perils, property and claims data for the person and the property from application through to claim.
CM: What do you think claims professionals can do to help manage costs?
KV: The more insight gathered on the asset and the person at first notice of loss, the better decisions that can be made at speed. For example, by using data to verify a customer’s claims history across both home and motor through data solutions such as LexisNexis Precision Claims, insurance providers can quickly reach indemnity decisions and reduce the risk of fraud.
Property insurance professionals can also promote claims prevention based on the known claims history for a property.
Meanwhile, motor insurance professionals might consider alternatives to traditional claims processes to help manage costs and facilitate an agile claims process. For example, the UK imports 70% of vehicle parts, so by recycling green parts we can create a domestic supply chain and also help the environment.
Or another example might be, if a courtesy car is not available, to ask the customer to consider alternatives; do they live near a public bike or scooter scheme or do they have access to another vehicle, can you incentivise them to not take a car, perhaps?
We do a great deal of work at LexisNexis Risk Solutions to deliver a single customer view which can enable insurers to recommend a more suitable alternative for that customer.
CM: Is there potential for more open-source data to be used in the claims process?
KV: A great example of this is through injecting data into the valuations process. Customers are sometimes wary of their insurer, convinced the insurer will try their best to either not pay out or not pay fairly. Injecting data into the total loss process in valuing a vehicle, for example, is not only more efficient, but makes it possible for non-specialist staff to process claims.
Importantly, it enables a fair valuation of the vehicle by taking into account current market rates for a very similar vehicle, helping build customer trust and increase brand loyalty.
CM: Do you think there will be more complaints coming from customers in the cost of living crisis? And how could claims professionals tackle this?
KV: Customer service is all the more important as the cost of living crisis bites. Insurance providers need to be both sensitive and proactive. Some of this comes back to the single customer view—insurance providers need to know if a customer has had a grievance with any part of the business in the past so that this can be front of mind for a new claim.
Going further, tapping into complaints and review data would enable insurance professionals to build a view of that individual’s propensity to complain and ensure they’re considerate of that during the customer’s interactions.
CM: How do you see 2023 for the insurance claims industry?
KV: There are so many dynamics at play but I hope 2023 could be a year we see a real change in the application of data enrichment at FNOL to bring an enhanced understanding of the claimant and the asset. This could help insurance claims professionals deal with the multiple challenges being faced—from fraud to rising costs—without losing focus on the genuine end customer and their individual needs.