How SME data validation can help tackle rising fraud risk
In this episode, IB Talk chats with Martyn Mathews, senior director, personal and commercial lines, of LexisNexis Risk Solutions, on the SME and e-trade market, zooming in on the current pressures the SME market faces and the high costs of running a business, and how this leads to fraud – particularly opportunistic fraud. Learn how Commercial PreQuote from LexisNexis® Risk Solutions helps solve the data enrichment problem in the market, protecting it from potential fraud risk. More than ever, due diligence is a requirement for all commercial insurance brokers and having the right tools to access accurate data in real-time to deliver a stronger customer experience.
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Narrator 1: [00:00:05] Welcome to IB Talk, the leading podcast for the insurance industry across the UK and Ireland brought to you by insurance business.
Narrator 2: [00:00:14] This episode is presented in partnership with LexisNexis Risk Solutions. In the latest episode of IB UK Talk, Martyn Matthews, senior director of commercial and personal lines at LexisNexis Risk Solutions, joins us to discuss how SME data validation can help tackle rising fraud risk.
Mia: [00:00:45] Hello and welcome to the latest edition of IB Talk, the Insurance Industry Podcast brought to you by Insurance Business. My name is Mia Wallace, senior news editor at Insurance Business UK. And today I am joined by the brilliant Martyn Matthews, Senior Director of commercial and personal lines at LexisNexis Solutions. Thank you so much for joining me here today, Martyn.
Martyn: [00:01:09] Thank you, Mia. And that is the best introduction that I've ever had. So today is off to a good start.
Narrator 2: [00:01:15] We're going to have to work on getting you better introductions in the future then. But I know that we're here to discuss a pretty weighty topic today around how SME data validation can help tackle rising fraud risk. So just to start us off, can you give me a bit of an overview of the SME and E trade market as it currently stands?
Martyn: [00:01:35] Yeah, absolutely. And thank you for the opportunity to to talk to you today. So SME market, very exciting market. There's a huge amount of opportunity. But with that opportunity as always comes an element of risk as well. There's a maelstrom of factors that are going on in the market that the market needs to contend with at the moment. So just to give you a sense of of some of those as we see it, so there has been a huge exponential growth in the number of small new businesses created partially due to the pandemic that we are now, hopefully mostly through. But even at the start of 2021, there was something like five and a half million small businesses in the UK, which is 99 ish percent of the entire population. So a huge number of businesses and a huge number of new businesses and the number of those that are trading online is growing all the time. So we saw an article from Polaris talking about the growth in the commercial lines business and the number of E traded policies. But when you consider that those those organizations often need some form of credit to buy insurance. So we think about six out of ten SMEs would rely on some form of credit combined with the overall cost of the pandemic and the environment that we found ourselves living in. You've got all of these factors together, so lots of new businesses, which is great because there's opportunity there for the market, but lots of things going on out there in the economy that can can affect those businesses and make it more difficult to to underwrite or write that risk with with confidence. So it is a challenge for the market, but one that we believe that we can we can help the markets through in order to achieve their growth aspirations.
Mia: [00:03:21] And, as you said, beautifully worded there. The market really is facing a maelstrom of factors and you can see how it's been buffeted by just an incredible array of challenges and opportunities. And I just wondered, what implications do these challenging environments have for a rise in fraud, particularly opportunistic fraud?
Martyn: [00:03:41] Yeah, and I think opportunistic. That is a great way to describe it actually, because, you know, fraud in itself has always been around and always will will move. In fact, if you talk to most fraud managers in large insurers or any insurance organization, they'll talk to you at the moment about some of the changing dynamics of fraud, where fraud can be moving from personal lines across to commercial lines. And that's ostensibly because there's been a huge amount of digitization and tools applied to the personal lines market. And so fraudsters have often found it more difficult and therefore fraud is moving over to the commercial sector and that can take many forms. An opportunistic quite often is one of those. If we think about the cost of living, I'll call it a crisis. But a cost of living crisis where where everything is more expensive, it's more difficult to operate. All of those small new businesses that I talked about earlier, there will always be the the temptation or the possibility to inflate, for example, the something at the point of claim, but also to misrepresent what's actually your business looks like. And it's financial stability and so on at the point of quote as well. So the types of fraud are not actually always uncommon from those that we've seen before in personal lines. But the big the key here is that it is moving from personal lines across to commercial lines, and that is where the market needs to now be on the lookout and do as much as it can to start to to combat that type of activity. And there are a whole host of things, including sort of data and more intelligent use of tools that the market can do to to start to assess those issues.
Mia: [00:05:28] And given all the changes that we're seeing in the fraud landscape, how does data and data enrichment fits into the matrix of fraud mitigation?
Martyn: [00:05:36] Yes, it's. Incredibly important, and you might expect me to say that as well, because I am a data guy. I'm a self-confessed data geek. But SME data validation is is critical. It's one it's one component of the overall picture but is critical. So so how I like to think of it certainly in the SME market is in the immediate term greater validation or completion of missing data that's presented to you will have an immediate impact on preventing fraud. And I'll come back to something in a moment. But in the short term, there's then the application of automated fraud detection tools, a little bit like we talked about the personal lines market currently enjoys, but even on a mid term basis a much greater sharing of data. So the application of data sharing will be there to greatly reduce opportunistic and organized fraud. So if you understand, for example, what's happened in a policy over over a period, it's much more difficult for that sort of opportunistic fraud to occur when somebody might misrepresent the information that they present. But just going back to give you a very, very simple but really, really effective example of where data validation can help. So often we find with E trade or SME risks that there is information missing and if it's a business owner, it can often be date of birth, for example. And if you don't have that information, it makes it really, really difficult to validate that business owner. And you are you are taking a greater risk. Well, you know, the sort of tools that we're talking about today and the types of activities that you can do can really help to solve for that. So if the database is missing, actually, we can use proprietary sort of linking technology and data to find a match to about 75 to 85% of those individuals, which ultimately means you can write that risk much, much more effectively with confidence, but but importantly as well, do it in such a way that the customer experience is actually enhanced. So you're reducing fraud, but you're also ensuring that you keep a great customer experience.
Mia: [00:07:45] Superb. And I know that last time we caught that, we had the opportunity to have a really great chat about LexisNexis or Solutions commercial PreQuote offerings I think we're touching on here. And can you just tell me a little bit about how this commercial PreQuote solution helps protect the SME market from potential fraud risk?
Martyn: [00:08:03] Absolutely. So look, and you and I have spoken about this before, but for anyone else who hasn't heard me talk to this, there's a notion that commercial brokers, insurers have paid played second fiddle to personal lines in terms of data enrichment. And that's something that I touched on earlier. But but we're actually on a mission, a mission to change all of that. So both as an organization and me personally, it's a real mission of ours to make sure that we level up that playing field to help the commercial market start to to combat fraud. And we've worked in conjunction with with customers and partners alike. So to give you a sense of what that looks like, we go to the market and we talk to those commercial insurers and brokers and we say, what are those specific issues that you're facing? Have we got this right? And then we work with partners who work extensively in the market. So as an example, actress who we've launched commercial PreQuote with with first and it's all about adding data enrichment to the quotation and the customer onboarding process, which I guess does three, has three core functions. Firstly, improves the customer journey and reduces the number of referrals that an organization has to deal with. Secondly, reducing friction and fraud by creating these process efficiencies and improvement. So I touched earlier on missing data and how that can lead to fraud. Well, that's a key component of this solution that we talk about here and reducing duplication. So there's a lot of duplication in terms of the data that's input for brokers and insurers, and there's a lot of toing and froing and back and forth and that actually can reduce can result in a huge amount of frictional cost, both for the organization itself and then in terms of technology costs as well. So what we've done is we work with the market to create a solution that is the first stage at the moment towards combating some of those those issues that I mentioned. So just briefly, we've launched with property, landlord, commercial and liability insurance products to help combat some of those issues that I've mentioned using a whole range of data. So that was a very, very long sentence, but hopefully gave you a sense of what we're trying to do to support the market through some of these challenges.
Mia: [00:10:21] No, it absolutely did. And I must say, I can imagine that clients and partners alike are pretty delighted to have somebody out there who's making it their mission to level up that playing field.
Martyn: [00:10:32] Absolutely. The market engagement to date has been fantastic and thank you to those organizations who engaged heavily with us to create this solution. I won't talk to specific names, but you know who you are. So thank you very much and thank you to the teams actress as well for for making this happen. What's most pleasing for me, I think, is I'm not the only person who's on a mission to make a difference. Every fraud manager, every risk manager that we engage with across the commercial space recognizes there's an issue not just now but off into the future, because I don't think we've seen all of the residual issues that will come about as a result of the pandemic and all of the conditions that that we talked about earlier in terms of cost of living as well. So what's really pleasing for me is I guess pushing on an open door would be one way to describe it. But actually there's a real recognition that the market can do more and wants to do more and will do more. And that's really pleasing for someone in my position who is passionate about trying to make a difference on behalf of the industry. So I guess I would congratulate and thanks say thank you to the whole insurance industry actually for for wanting to make a change. And where I see this going in the future, again, I touched on it before, but when it comes to data sharing, again, I'm a passionate advocate of data sharing because it can it can supply huge value to both the insurance organization but also to the end customer as well. So I would encourage the market to continue its engagement with us on those data sharing initiatives because I think that's the next stage towards getting where we want to be. But yes, very, very positive engagement to date. So that's really, really pleasing to see.
Mia: [00:12:17] That's really fantastic. Here, I must say. Martyn And something that you touched on earlier that I think is really interesting because I also think it's often quite an under-discussed. Part of fraud mitigation is its knock on and very positive effects on customer service. And from your perspective, how does commercial also help brokers deliver stronger service and experience to SME?
Martyn: [00:12:40] And again, this is something that I get extremely passionate about, so I make no apologies for, for getting quite excited when I talk about this. But I think I think it's really important when an organization looks at its overall customer strategy to recognize that that reduction of fraud and digitization is is particularly important, but it has to balance out against the customer journey as well. So you can stop every single item of fraud, but you may find that the customer journey is affected because each and every customer is put in a position where they go through a manual referral process. So there's a there's a real balance to find there. But ultimately, there are a couple of key points that this particular solution helps to address. And they are things like, so there's no need to repeat that information. So the straight through processing is is critical. You can enrich the data immediately. So that's done on a machine to machine basis as well rather than sort of manual intervention. But it comes back to this point, which is it's all about robust straight through processing and processing. And we know not just from the personal lines market, but also within commercial lines, customers have a higher expectation now and place a value on the way in which it can interact with an organization. So again, the two key areas here, firstly this solution will help organizations right to risk more effectively so combating that fraud. But ultimately we'll do it in such a way that the customer journey is actually enhanced because the more customers that you can process straight through without any kind of manual intervention, the better providing you are picking up the appropriate risks. We know that that will create a much better customer relationship, which ultimately leads to greater retention and therefore profitability on behalf of the of the insurer or broker as well. Because customers more and more just value, value the way in which these in the way in which they interact with with an organization. I mean, you don't have to look too far to find all of those great examples in your everyday life of digitization where the organizations that get it right create that fantastic customer experience. Well, why can't we have that in insurance as well? I believe we can, and I believe that in many ways that happens already. But there's certainly more that can be done. And in the sort of broker SME e-trade space, then, then there's certainly more that can be done. And I think this is a step towards that goal.
Mia: [00:15:10] And looking across the market. So you see that there is a great desire for stronger and better customer relationships that are founded on the idea of able to mutually support each other.
Martyn: [00:15:24] I think absolutely. So for me, we have some research from a consumer perspective, let's say perhaps from from the commercial perspective, but clearly consumers buying habits or people in organizations buying habits and behaviors have changed from being a price driven decision to making sure that price is important. But the service that you receive and the way in which you interact with an organization is ever more important, particularly at claim stage as well. When it's the moment of truth, when when something happens, you've got to be absolutely sure that this product, which let's be honest, you've only bought to cover you in the event of a claim, is there to support you. So for me, an organization, a buyers perspective, it has to be right. But again, what I've seen from an insurer perspective is that insurers have put in for treating customers fairly right at the heart of their interactions, and that spans across the commercial space as well. So you've got insurers wanting to do the right thing by the customer, wanting to create the right customer experience and sell the most appropriate product for that customer and the customer's desire to buy that in such a way that it's frictionless, that it feels easy, and that they haven't had to go through an onerous process. Put those two things together if you can get that right, if you can use data and analytics, as we suggest here with the commercial quote to aid that process, that is a very, very cool place to be and will result in ultimately in better relationships with with customers in whatever guise they are, whether they be small businesses, large or consumer buying a policy.
Mia: [00:17:01] Certainly. And between the ability to write a risk more effectively and enhance the customer journey. I can imagine that insurance businesses across the value chain must be incredibly drawn to the solution. So can you tell me a little bit about how they can find out more about commercial PreQuotes and the way it can support their businesses?
Martyn: [00:17:19] Absolutely. So you will hear more either media. So articles that talk to the conversation that you and I have just had. If you are a broker on the actress platform, you can speak to your actress account manager. We will be moving this out to other platforms in due course as well. But right now it's been launched on actress or you can talk to us at LexisNexis. So whilst I've spoken to you today, Mia, there's a guy that's responsible for this product in the UK. His name is Paul Turner and I'm going to read out his email address. I don't know whether anyone can shut it down, but it's Paul Turner at LexisNexis Risk. So a very snappy email address, but you can contact us here at LexisNexis and we will gladly talk you through how this solution can benefit your business. But you know what? Even if this solution isn't right for you at this time, we'd love to have a conversation with you anyway, because it's the insurance market's opinion that we value so highly, and it's the insurance market that will help us shape the next generation of our products, whether it be on the commercial line side or the personal line side. So probably gathered by now. I'm always happy to have a conversation. I love to have a conversation. So yeah, I welcome any interaction from the market.
Mia: [00:18:35] That's absolutely fantastic. And I must just say thank you so much for joining me here today, Martyn, because it's always such a pleasure to speak with you and find out what's keeping you in the team busy these days.
Martyn: [00:18:46] And the same to you. Thank you very much for the opportunity to to speak to everybody. It's great. And as I say, the more interaction, the better. So please do feel free to drop us an email or pick up the phone. And thanks again to you, Mia.
Mia: [00:18:58] And thanks also to everybody for tuning in today. And I look forward to welcoming you back next time here on IB Talk. Thank you for listening to this episode of IB UK talk for more from Martyn and the team at LexisNexis Risk Solutions. You can visit them at risk.lexisnexis.co.uk. Thank you for listening to IB talk for the latest episodes. Please be sure to follow us on SoundCloud, Stitcher and Apple Podcasts.
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