We are the voice of insurance and long-term savings | Contact us

Data in Insurance

From ordering an Uber to Googling the weather, using data is part of your everyday lifeUsing data makes your life easier and makes products more convenient for youData that is held about you can make sure you have the right insurance policy, which is suitable for your needs. The data used in insurance creates a picture of who you are and the likelihood that something might happen, in order to protect you if it does. With all the new technology available today, this data can be used in different ways which benefits customers. For example, your insurance company may ask to install sensors in your house which can detect gas or water leaks to minimise any damage caused to your home, or a young driver could install a Blackbox in their car to reduce their car insurance premium.  

To calculate how much a premium should be and the probability of an event happening, insurers need data. This data can be specific to you or could be more general, but it all helps build a picture for insurance companies to provide the cover you need if the unexpected happens. With recent technology advancements and widespread digitisation, the amount of data provided to insurance companies has increased, become more accurate, and can even be provided in real-time – such as through wearable technology. This is can be beneficial for you, as you get more personalised products and services, as well as for the insurer as they can create a more accurate picture of your risk. 

At the ABI, we know of many examples where data is used by insurers for their customers’ benefit. You will have heard of some examples, but others are not so well known.   

What data is used by insurers? 

Insurers can gather data from information you give them, via an online form, a price comparison website, or from other sources. One example where data is gathered from alternative sources can be through data brokers, which are companies that collect data from multiple sources and anonymise it.  

Insurers are now able to collect, process and use data across various stages of the insurance product lifecycle, such as product design, marketing, sales and distribution, pricing and underwriting and claims handling. This data can offer you, as a consumer, many benefits.   

How does that impact you? 

The more data which is provided to insurers and how specific it is usually means a more accurate analysis of it. This can lead to more personalised and affordable insurance products as well as more efficient servicing for customers. Insurers can expand their distribution reach, ensuring more accurate pricing and help insurers better detect fraud which can, in turn, lower the cost of premiums.  

There are stages between an insurer creating a product and a customer buying an insurance policy. Insurers have invented ways in which data can be used throughout this product journey which can often improve the customer journey. This can be through the creation of new innovative products or distribution channels, or through the use of new technologies in customer services that can speed up claims. There are many examples of where this has been done, but we have included specific ones below. 

Developing new products  

People are changing the way they interact with financial services, like their banks or insurance companies. Customers who already engaged with technology expect services to be immediate, convenient, and available in a variety of forms (like apps or online). As an industry, we adapt our products and processes to ensure that different generations are able to find the right insurance and protection. This can help individuals whose finances might be stretched find affordable cover. The use of wearable technology, such as smart watches, to encourage policyholders to exercise to reduce their health insurance premiums with the promise of other incentives, like discounts and offers, is one example of this. Another example is the use of telematics for young drivers which can help provide affordable car insurance, through rewarding safe driving practices with a lower premium. These benefits can apply to older drivers too. Alongside telematics, there has been an increase in ‘buy as you drive’ policies that can offer flexible cover for financially stretched generations who might not drive enough to warrant the expense of an annual policy.  

People who work irregularly or part time might not be covered by company insurance, so insurance providers are working on ways to offer these people protection. Insurers are developing more flexible products to ensure that the needs of the changing labour force are met. For example, delivery drivers are not normally covered by personal insurance policies due to increased risks, so some providers have developed specific policies for these workers who work irregularly to ensure that they are adequately and affordably covered. Some of these policies can even be calculated per hour to ensure that policies meet the needs of flexible working patterns.  

Flexible and on-demand insurance products are increasingly becoming more widespread; for example, some providers offer monthly rolling contracts for contents insurance. Another flexible product is travel insurance which is tracked, with the customer’s consent, through the GPS in the policyholder’s smartphone, so their cover automatically switches on when they enter a different country. This ensures a slick and convenient service which automatically switches to an annual cover when it reaches a threshold amount. These types of flexible products have emerged to meet the changing needs of customers, particularly those who are technologically-savvy. We expect on-demand insurance and usage-based insurance (UBI) to become more widespread and for new products to emerge. 

The Internet of Things has helped create products which focus on prevention or situational insurance, for example, a sensor will be able to monitor a household's water consumption patterns, detecting potential leaks and interrupting the flow before the basement is flooded. This can prevent major damage and a potentially costly claim.  

Customer experience and engagement 

Insurers are increasingly using Artificial Intelligence (AI) to automate simpler stages of the claims process (i.e. automatically filling in paperwork) can enable claims handlers to spend more time on more complex cases. The use of Robo-advice, AI, and chat-bots can ensure a smooth customer journey. Some insurers can have triggers for chatbots to offer additional help if a customer is having difficulty filling out forms. 

There have also been AI programs developed for insurance claims lawyers which can assess medical claims by taking data automatically from medical reports, for example, and compare that data to which other claims of the same type were approved. From that data, it would determine if the claim should be approved. This can all be done by sending the AI program and email with all the relevant documents attached, so it can then open a case and to all the legal paperwork. Once the paperwork is complete, the AI lawyer sends an email to the insurer to confirm everything and settle the case. If the insurer doesn’t confirm in a set amount of time, the case is allocated to a live handler. This can benefit customers as it will mean a case that would take several days to close will now take minutes.  

Ways to find insurance 

The rise in insurance aggregators (or price comparison websites) has enabled customers to make more informed decisions when picking their insurance policies. Customers can enter their data once into a website and compare hundreds of policies within minutes. This can improve the customer’s journey as it gives them more choice and the ability to have an overview of the market. It can also show customers what products are available to them, which they may not have realised existed before. 

Fraud detection 

Insurance fraud costs the UK billions every year, adding an extra £50 onto your motor insurance policies. To help stop this, software is being developed, with backing from the Government, which combines AI and voice recognition technology to detect fraud and assess the credibility of insurance claims. This will help insurers detect fraudulent claims more easily and will save customers more money in the long term.