Tomorrow’s Insurance Premium Tax (IPT) rise is just the latest in an “onslaught of challenges” the insurance sector has had to face this year, according to the managing director of LexisNexis Risk Solutions. From Brexit and the snap election, to Ogden and the second shelving of the whiplash reforms, just five months in, the year has been a bumpy one.
But does opportunity lie among the obstacles?
“Fundamentally, insurers and brokers have the power to take back some control by gaining a clearer view of risk at all stages of the insurance process, leveraging data to make the right decisions for their customers and their businesses,” Keith Binley, managing director of LexisNexis Risk Solutions, UK and Ireland, said in a statement issued to Insurance Business.
“This is going to be key for insurers to maintain their current minimal margins in spite of the increase, and consumers to not have to take on the tax increase as a premium hike,” he explained.
Motor insurance is just one sector of the market to be hit, Binley said – a market which is already under huge pricing pressures, and one where “the basic affordability of car insurance is really in question.”
With the Government making clear that there will be no concessions for telematics policies, it’s up to the insurance industry to work together to find ways to support customers with fair pricing, while reducing exposure to poor risks and helping to improve the poorest drivers, he argued.
“This is particularly important for people who pay the highest premiums in accordance with their risk and therefore will be the most severely hit by the IPT increase,” he explained. “The cost of offering telematics insurance is falling dramatically through advances in technology – creating appeal for the mass market who wants to be priced based on their driving behaviour.”
In times like these, insurance companies need to use every tool at their disposal to understand individual risks, segment customers and deliver more tailored, valued propositions, according to Binley.
“From our perspective, customer data ultimately holds the key to fairer premiums,” he said. “For example, a correlation between motor policy history and loss cost has now been established through contributory databases, giving insurers a much better picture of risk at point of quote.”
But despite the challenges thrown at it, the insurance industry has never sat back waiting for a magic wand to solve all its problems, the LexisNexis boss said.
“This is one of the most innovative financial markets in the world and immense progress has already been made in supporting access to more affordable insurance, underpinned by analytics to evaluate risk and the expansion of data agnostic technology to collect driving behaviour data,” he noted.
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