Underinsurance – how is data helping?

Customers being underinsured isn’t a new topic. But in today’s challenging financial climate exacerbating a long-standing issue, it’s clear that brokers and insurers need to work together to help tackle the problem.

In this article, Jason Chambers, Head of Underwriting Automation at Aviva, discusses how our underwriters can access data to accurately identify underinsurance, presenting insights in a personalised format so our customers can make an informed decision on their cover.

Recent trends

“Making changes to an insurance policy isn’t always at the front of people’s minds – especially during periods of uncertainty. We saw this during the Pandemic, where 44% of UK businesses claimed to make significant changes to the way they operate1, yet only 20% updated their cover2.

The reality is underinsurance isn’t a new topic. But with the current cost of living crisis being compounded by the ongoing impacts of Brexit, supply chain issues and the war in Ukraine, there’s a higher level of risk than we’ve seen previously – especially in buildings insurance.

Customers have tough choices ahead about how they spend their money – making a conversation about not having the right level of cover a tough pill to swallow.

Our role as the insurer is to make sure we’re working with our broker partners and not just leaving them to get on with it.

Through the data available to us, we’re putting accurate and personalised insights into the hands of brokers, allowing them to present all the facts and evidence to their client so they can make an informed decision on their level of cover.”

Translating data to help identify underinsurance

“Customers expect a certain level of service and personalisation in todays’ digital world – not just in insurance, but in everything they do. They expect that we know who they are, what they do and how market trends or conditions may be impacting them.

The days of simply adding blanket increases across the board are long gone. Given the challenges of the market right now, it’s difficult for a customer know if they’ve got enough cover or not. If customers don’t assess their situation they could potentially be rolling the dice on their future in the event of a large loss.

Through our Commercial Intelligence Tool (CIT), we can help estimate the costs of rebuilding most properties, including the cost of demolition and professional fees. This is done by using a range of data sources, including rich data from third-party building valuations specialists, to help us understand the customers’ property in detail – including age, square footage, building characteristics, materials and so on.

This data is then compiled and analysed to calculate a Buildings Statement that’s used to identify whether or not the property is underinsured. Importantly, the sources we use are regularly updated and take into account geographical nuances in areas like costs of materials, equipment hire and labour rates.

This allows us to accurately identify those customers who we believe are at risk of underinsurance, presenting tailored reports to the broker to support a data-driven conversation with their client.”

Underwriting engagement

“Our underwriters are actively working with our broker partners to share this data and information in a way that means something to them and their clients.

This is being done in a number of ways:

Our priority is identifying those customers who are most at risk of underinsurance. We’re continually reviewing our database to find those customers who may have not updated their Sums Insured materially in the last three or four years and then actively reaching out to brokers to discuss this. Where we’re extremely confident, we can recommend appropriate cover limits. In some instances, this isn’t possible. But through our relationship with Barrett Corp & Harrington (BCH), customers who we believe to be underinsured are entitled to an e-Valuation property survey at a discounted rate of £85 excluding VAT.We can provide underinsurance reports at new business and renewal to help support tactical conversations at key timelines in the policy’s lifecycle.Alternatively, a broker can reach out to us and ask us to review their entire portfolio at any time. Our underwriters can then use our Commercial Intelligence Tool (CIT) and provide a report back to the broker of all of the customers we believe to be underinsured.

A trusted partner

“Underinsurance is an industry-wide challenge that means brokers and insurers need to work together on behalf of the customer, to help to provide the best possible outcome.

It’s an opportunity to build trust and foster long-term relationships. We hope through providing data-led information, the customer has everything they need to make an informed decision, while helping the broker to reinforce their position as a trusted advisor.

The good news is that we’re seeing an increased level of demand into our underwriters from brokers to help tackle the problem. We know that the broker has a huge responsibility to work with their clients to make sure the cover they have is suitable for their needs. By continuing to work with them and supporting with personalised client insights, we hope to make those conversations slightly easier.