Creating a deeper understanding of vehicle risk

Accurately assessing the risk of a vehicle and the proposer, as well as any named drivers, has always been a matter of calling upon data from multiple sources to validate and enrich the information provided in the application, creating a rounded view of the risk. However, there are now far more moving parts to consider. The rising cost[iii] of vehicle repairs, the ongoing cost-of-living crisis, and increased regulation around pricing and product suitability, as well as the constant threat of fraud, have all contributed to making risk more challenging to predict. 

The available data insights that help to achieve a good understanding of the risk of any particular driver have advanced considerably in recent years. The next logical step is to bring in more granular data on the vehicle being insured. After all, two vehicles of the same make, model and year of manufacture can have entirely different histories that affect the value of the vehicle and risk of a claim. Insurance providers need to understand the difference in risk between a car that has been driven fewer than 5,000 miles a year compared to another that is driven 25,000 in the same period. Alternatively, a vehicle may have had one previous owner from new, versus another that has had five since it rolled off the production line.

There is also the potential to use data analysis from MOT passes, fails and advisories to understand more about the risk of the driver based on how well they maintain their vehicle.

The need for this level of granular detail on the ‘metal’ has become more urgent as insurance providers face a number of diverging trends. The cars being driven on the U.K. road network are now the oldest on average than they have ever been[iv], rising to over nine years old. Research also suggests one in four owners are delaying potentially necessary servicing due to the cost-of-living crisis[v]. New cars also feature increasingly sophisticated safety technology[vi] which may make them safer to drive, but also makes them more costly to repair. Insurance providers are conscious of the slow but steady increase in electric vehicles on the road[vii] which have their own claims considerations.  

The market already benefits from Vehicle Identification Number (VIN) level data insights related to the presence and performance of ADAS on specific vehicles. Vehicle-centric data for insurance is now evolving to offer more detailed and accurate information on exactly how a vehicle has been used and looked after, from the day it rolled off the production line. This could help insurance providers to more accurately predict claims and the cost of repair, as well as improving the overall customer journey. It stands to reason that the more information an insurance provider has about the vehicle upfront, the less the demands put on the proposer to confirm that detail. 

This is why a single source of accurate, real-time information on a vehicle’s status, value and history, including how well it’s been maintained, is now being tested in earnest by a growing number of U.K. motor insurance providers.

It is clear that there are multiple benefits to this data solution. Not only will it tell insurance providers more about the risk of the ‘metal’, but it will also confirm accurate valuations in a way that gives the customer transparency and supports a smoother claims experience. Many of the complaints around vehicle market valuations stem from the condition of the vehicle in question, or its mileage at the time of claim[viii] so the job of the claims professional could become so much easier with real-time valuations data at their fingertips.

Indeed, now that the new Financial Conduct Authority’s (FCA) Consumer Duty is in place, whereby organisations must ensure customers receive clear lines of communication and positive outcomes, the more information an insurance provider can capture about the vehicle at each stage of the customer journey, the better the customer outcomes are likely to be.  

Now is the time for vehicle-centric data to shine.

Sources:

[i] https://www.abi.org.uk/news/news-articles/2023/6/keeping-motorists-mobile---motor-insurers-payouts-up-14-over-the-last-year/

[ii] https://www.ft.com/content/99928b77-57ec-44ae-b0c8-c67bf42ca3d2

[iii] https://www.abi.org.uk/news/news-articles/2023/6/keeping-motorists-mobile---motor-insurers-payouts-up-14-over-the-last-year/

[iv] https://www.ibisworld.com/uk/bed/average-age-of-motor-vehicles/44067/

[v] https://www.motoringresearch.com/car-news/motorists-delay-car-servicing-save-money/, https://bookmygarage.com/blog/two-thirds-of-drivers-cut-vehicle-usage-cost-of-living/

[vi] https://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-Motor-Industry-Facts-APRIL-2023.pdf

[vii] https://plc.autotrader.co.uk/press-centre/news-hub/used-car-transactions-q1-2023/

[viii] https://www.financial-ombudsman.org.uk/businesses/complaints-deal/insurance/motor-insurance/vehicle-valuations-write-offs