Defeating the Allure of Exaggeration in Homeowners Insurance

As we begin a new year, home insurance providers will be cognizant of the cost of living increases that many households will be experiencing this winter, as well as the ever-present threat of extreme weather events, as well as the tendency for fraud to increase during periods of economic hardship, among other things. 1 Extensively detailed home insurance claims data, which is currently being amassed from all corners of the market, will soon be used to assist the market in combating the temptation to exaggerate in home insurance claims and in providing more individualized service that customers will truly appreciate, according to industry experts.

According to a survey conducted by LexisNexis Risk Solutions UK on house insurance customers2, concerns about an increase in fraud may be well-founded. Approximately half of those who have recently filed a claim are more likely to consider adjusting or exaggerating their claim in the future in order to receive a larger payout, and nearly nine out of ten of the same group believe that home insurance providers try to avoid paying out on claims at least some of the time, according to the study results. Furthermore, two out of every three consumers believe that it is okay to alter the information they offer when utilizing price-comparison websites in order to obtain a lower quote for home insurance is acceptable. This could include omitting to state or incorrectly stating any earlier assertions.

However, while the overall opinion of house insurance carriers is excellent, LexisNexis Risk Solutions discovered that there is still an unwarranted bad impression when it comes to claims and premiums, despite the positive overall perception. Consumers who have recently submitted claims believe that providers strive to avoid paying out claims at least portion of the time, according to nearly nine out of ten respondents. Providers are believed to attempt to avoid paying claims on a consistent basis by more than one-third of this group. In actuality, 42 percent of the premiums remained the same during the year.

A contributory home claims database can provide insurance carriers with the information they need to assist them improve the way their consumers think about house insurance in the future. Given the findings of a Premium Credit Report3 in 2021, which revealed that 7 percent of consumers surveyed had terminated or reduced their home insurance coverage owing to financial concerns, this will be top of mind.

In order to provide more fair and accurate pricing based on a better knowledge of the risk, very granular detail on prior claims can be pulled into the quote process rather than having to rely on customers to corroborate previous claims.

The availability of accurate and comprehensive prior claims information about an individual and a property from across the entire market at the time of notification of loss and claim investigation can put claims professionals in a much better position to identify potential fraud and expedite genuine claims.

This information may be used to quickly discover a pattern of claims of a similar sort made by the individual, or it may be used to determine if this is the first time they have filed a claim. Moreover, it may indicate that the property has a history of insurance claims, such as for floods or a roofing problem, that occurred previous to the customer’s ownership or lease. In essence, this data will provide valuable context for new claims, allowing the process to run more smoothly during a stressful time for customers, while also flagging those that require additional inquiry more quickly.

It is also possible that making it known to customers that insurance carriers have access to previous claims data will lessen the temptation to overstate or fabricate claims.

Home insurance companies are under increasing pressure to make insurance more affordable and equitable, not only in reaction to adverse market conditions, but also in order to comply with new pricing requirements. They must make certain that, in the event of a storm or flood, homeowners are sufficiently protected. They must also prepare for the possibility of an increase in fraud. According to the most recent data from the Association of British Insurers, there will be 24,000 occurrences of property insurance fraud in 2020, with a total value of £111 million in the industry. According to a separate analysis by Aviva, the proportion of home insurance claims that are rejected due to fraud is expected to increase by 26 percent in 2020. 5

That the house insurance market must better understand customer attitudes and views of home insurance, as well as the potential benefits of sharing industry data on claims history in the application, underwriting, pricing, and claims processes, is clear.

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