Sam Marsh, director, product management at LexisNexis Risk Solutions Insurance
As road fuel costs reach a record high[i] and inflation hits a level not seen in 40 years[ii], it is little wonder that reducing motoring spend, including shopping around for cheaper car insurance, is top of the agenda for many people. Indeed, recent reports indicate that 68% of UK adults plan to decrease the amount they spend on driving[iii]. As finances are squeezed, the fact that one in five motor insurance buyers think it is fine to manipulate details in their insurance application to obtain a favourable quote on their premium[iv], indicates that insurance application fraud looks set to rise.
To some, quote manipulation may seem innocent enough, but deliberately misstating key pieces of information is fraud. This can have the knock-on effect of increasing policy prices for all. More concerning is that individuals deliberately misstating information in their application could find their policy is made null and void if this is discovered at claim and they may also find it difficult to obtain insurance in the future. What may seem like a little white lie can have long-lasting ramifications.
What exactly is quote manipulation though? Manipulating a quote is when a person applying for insurance (the proposer) deliberately materially changes information on an application throughout the quote journey, to reduce the premium. It could be the address the vehicle is left at overnight, whether it has any modifications or years licence held. Often this is done across numerous quotes to compare results, cherry-picking the best.
‘Fronting’ is an example of application fraud and often involves quote manipulation. This is where a person (often a father/mother/older sibling) declare themselves as the main driver/proposer, when really it is their newly qualified family member who would be a higher cost to insure. They will try numerous quotes, swapping out different main drivers, to see how the costs compare.
So how can the shrewd use of data enrichment at point of quote help the industry move the fight against fraud from detection at point of claim, to prevention at the front door? It comes down to using quotation data intelligence gathered from across the insurance market.
Fraud comes in many guises, but insurance providers cannot fight it in silo. A market-wide quote history database can help identify potentially fraudulent quote behaviour in real-time by comparing quotes across a specific period of time to identify the probability of data being manipulated. This insight puts insurance providers in a position to check the facts with the customer before policy inception.
It’s not just fraud prevention this quote history data can help with, understanding the likelihood of quote manipulation can also help support pricing and underwriting practices, when used alongside additional data attributes at the point of quote.
Indeed, insurance providers could combine unique insight into how, when and if an individual has shopped for insurance with further insurance specific data sources such as policy history (cancellations, gaps in cover); vehicle history (MOT, valuation, mileage); the presence and performance of Advanced Driver Assistance Systems; and soon claims history to create a 360-degree view of the risk. This can help insurance providers consider the suitability of a product or price for a particular customer, offering them a significantly better customer experience.
Our research suggests that it is younger people who are more likely to manipulate quotes with nearly three quarters of 18–24-year-olds in our recent study thinking any or some adjustment of information is okay in order to reduce their insurance premium[v]. This may not come as a surprise given a recent report has found that the under-30s are disproportionately being forced to bear the brunt of the costs of social care reform and Covid via a 10% increase National Insurance Contributions and freeze on the student loan repayment threshold[vi]. So, the ‘Packhorse Generation’ as they are being dubbed, may, more than other generations, give in to the temptation of quote manipulation.
However, as stated previously, if an insurance provider knows up front the risk of a quote being manipulated, that is their opportunity to query the validity of the data and educate consumers who may be genuinely unaware of the risks of deliberate mis-statements, before policy inception. This approach can help protect both themselves and the customer from the outcome of fraud.
As economic pressure spirals, insurance professionals have an immediate opportunity to leverage consumer quote information to educate, protect and price customers based on their shopping behaviour.
[i] https://www.rac.co.uk/drive/news/fuel-prices/diesel-fuel-prices-hit-new-record-high-as-uk-moves-away-from-importing-russ/
[ii] https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/april2022
[iii] https://www.themotorombudsman.org/press-releases/tmo-urges-motorists-to-keep-vehicle-servicing-front-of-mind-in-the-face-of-cost-of-living-hike
[iv] LexisNexis Risk Solutions was not identified as the sponsor of this research, which was based on a survey of 1,546 consumers who had bought motor insurance online within the last 12 months and was conducted during April 2022
[v] LexisNexis Risk Solutions was not identified as the sponsor of this research, which was based on a survey of 1,546 consumers who had bought motor insurance online within the last 12 months and was conducted during April 2022
[vi] https://www.if.org.uk/wp-content/uploads/2022/02/packhorse_inflation_press_release_FINAL.pdf
