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News Article : Proper validation of motor assets key to progress in SA insurance sector
Category: Short-Term Insurance : Motor Vehicle
Author:Edited by ITInews
Email:[email protected]
Posted:21 Nov 2013

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Insurers must look to remove mis-priced risk

The automotive insurance industry has become increasingly competitive and pressured in recent years fuelled largely by the emergence of direct insurers and aggregators and a tough economic environment.

This is compounded by increasingly sophisticated fraud in areas such as claims.

As a result, it is crucial for South African short term insurance companies to properly validate clients' motor assets at different parts of the insurance policy life cycle in order to remain competitive and profitable.

This is according to Jasper van Heesch, Head of Business Development at Lightstone Auto, provider of comprehensive data, analytics and systems on automotive assets, who says that a shift towards data driven decision-making is necessary to squeeze out fraud, mis-priced risk and operational inefficiencies.

He explains that there are a number of elements driving the need for more accurate asset determination.

"Firstly, impending Treating Customers Fairly (TCF) regulations (in 2014) is pushing insurers to appropriately price their policies and suitably treat their customers in the event of a claim, if they are not doing so already.

"Secondly, the current flat insurance market is forcing insurers to be more competitive in their pricing, to maintain growth in a highly competitive market. This effectively means that insurers seek to remove mis-priced risk so that they are not unnecessarily less competitive than others."

"These factors increase the need for insurers to more accurately understand what they are dealing with right from the outset of a policy."

He says that for example, at the quoting stage, making informed decisions about the risk profile of a vehicle requires having a clear understanding of the asset.

This includes evaluating what it is, what condition it is in, who is driving it, its history, how much it will cost to repair or replace and where it is.

He says that there are, however, challenges that insurers face in creating more risk-reflective premiums.

"For example, in some cases brokers don't provide underwriters with all of the vehicle details they require.  In addition, many individuals seeking an insurance policy often don't know the intimate details of their vehicles when their brokers or call centres ask them.

For example, is the client driving an Audi A3 Sportback 1.8T FSi Ambition or the FSi SE, which has a material difference in output KW and top speed and hence on risk profile?

Similarly, a small identification error like that could mean that the car that is quoted for does not have expensive Xenon head lights, while the actual car does.

Not knowing the vehicles VIN number can also have a material difference on the likelihood of a claim and the cost of repair."

Van Heesch adds that interpreting data such as a client's risk and income profile, as well as understanding the risks associated with where the client lives, such as crime rate or climate (i.e. whether the area is prone to flooding or hail) cannot be underestimated when creating reflective premiums.

On combating fraud, he says that insurers need to know that the vehicle being presented for a quote is not stolen or has any other worrying classifications e.g. it is a Salvage Code 4 which means it should have been Permanently Demolished.

"Having a real-time view of a vehicle's 'status' is vital as fraudsters move quickly and often know how to play the system. An insurer accessing old data, (or none at all), can potentially be exposed to fraud."

Besides at the quoting stage, Van Heesch holds that insurers need to quickly and accurately know what they are dealing with at other points in the policy lifecycle.

"At an accident scene for example, the insurance support centre agent often struggles to know whether the vehicle is in fact one of theirs as the details provided over the phone are often sketchy or unverified."

"This hampers their ability to make the right decisions about what to instruct the tow truck driver on the scene."

"This often exposes insurers to unnecessary towing costs and/or the provision of the wrong customer service. If an insurer gets the right data exactly when they need it they can then make the right decisions. Everyone wins, excluding the fraudsters!"

Van Heesch says that aiding this process is technology, which is fast evolving - particularly in the mobile space.

"Mobile Apps that can quickly and accurately identify and verify a vehicle to help users make informed decisions are proving to be a powerful tool in the hands of brokers, policy holders, inspectors and assessors, let alone users in other parts of the vehicle ownership value chain including dealers and lenders."

Lightstone, along with their mobile software development partner, CustomApp have developed a mobile App suite which includes an award-winning mobile App called LIVE (Lightstone Information and Verification Exchange)  which enables users to verify both a vehicle and a person's driver licence card, and a pre-inspection App that can be put into the hands of inspectors or even policy holders.

"In today's competitive insurance environment, having real-time access to the right data, pertaining to the right vehicle, is vital in minimising risk and making informed policy and pricing decisions. Technology is key to this." concludes van Heesch.

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