Collaborate and conquer

Insurtech can be a double-edged sword for insurers, a fact underlined in a report published in the Financial Times on October 14. The heading – ‘Insurance sector worried as insurtech startups cosy up to customers’ – reflects the growing threat posed by new technology as challenger brands move into space that was once the preserve of traditional insurers.

Research by the US investment bank Financial Technology Partners reveals that insurtech companies raised $2.6 billion last year – more than the five previous years combined – while PwC reported earlier this year that almost half of insurance companies believe they will lose 20 percent of their business to insurtech companies over the next five years.

Will the regulators prevent companies giving the best deals to new customers only?

Recent news shows that customers of the four largest energy companies in the UK have been barred from getting the best deals for gas and electricity.

New customers are able to take advantage of the best deals, while existing customers are offered deals which can mean they pay hundreds of pounds more per year.

The same is also true with insurance companies. Existing customers do not get the best prices offered to them at renewal time, and the best deals are offered to new customers.

RDT helps the FCA lift the lid on Big Data

In November 2015, the Financial Conduct Authority (FCA) announced that it would investigate the use of big data in general insurance (GI), focusing on private motor and home insurance, and would seek input from industry stakeholders and experts. As an insurtech specialist in the GI sector, RDT provided a written response to questions on data usage – and was the only technology company that the FCA named as a contributor.

The FCA’s questions covered data sources, data accuracy, and how the growing use of digital information might impact consumers and businesses. The aim was to see if big data would foster or constrain competition, whether some consumers might be marginalised because of an increasingly granular approach to underwriting, and whether the regulatory framework needs adjusting in light of advances in technology.

With the help of RDT’s insights, the FCA has concluded that big data is more friend than foe. In its Feedback Statement, published on 21 September, it said that big data is “producing a range of benefits for consumers in motor and home insurance, by transforming how consumers deal with retail GI firms, encouraging more innovation in products and services and streamlining parts of the customer journey.” The FCA said that because the use of data by insurance firms is “broadly working well”, it would not launch an in-depth market study.

ABI continue to highlight the impact of insurance fraud

A report by the ABI has highlighted the ingenuity of insurance fraudsters, along with the incredibly high cost to honest customers. From fake road accidents to false reports of loss, the cheats are costing the industry £25million a week and pushing up premiums. 

The clampdown on false whiplash claims a few years ago forced the fraudsters to become more resourceful. Many are caught quite easily – one woman made a claim for her lost wedding ring but sent her insurer a photo of the item that was dated the day after she lodged the claim. And another made a big injury claim after a fall, but CCTV film of the incident shows her staging her fall.

There are many stories like this, often ending with the criminals being handed stiff prison sentences. However not all fraudsters are incompetent and don’t get caught, making prevention the best option for insurers. Technology is a great tool in that area and RDT is one of the leading innovators of systems that detect both application and claims fraud. Our three core products – Landscape, Equator and Skyline – all have sophisticated analytics and use data enrichment to help expose fraud, and RDT is committed to continuous research and development to block new scams.