Insurers are using data from a huge number of sources to price risks. While this has the potential to transform products and practices across financial services positively, it may also affect consumers who are unable to access standard insurance products.
On estimate, in 2015 The Source lost out on around 10,000 household quotes due to insurers considering risks to be outside of the norm. A leading aggregator revealed that a quarter of its household quotes were classed as non-standard risks in 2015.
This may seem understandable given the number of properties that are at risk from flood for example. However, there are now other factors that cast a risk into the non-standard pool. Factors such as renovation and unoccupied properties also get insurers nervy.
Rather it seems that the property itself is becoming a secondary issue with insurers utilising the data to investigate the behaviour and profile of the owner or tenant.
Have they ever declared themselves bankrupt? Do they have a county court judgement (CCJ) against their name? Given the troubled economic times that we now appear to be coming out of, the number of people with CCJs has increased.
As a result of the recession, there has been an evident increase in home working, particularly in the childminding industry, for example. While they are to be applauded for their entrepreneurial approach, if they receive visitors to their home as part of their working day then this has the potential to be regarded as a non-standard risk. While this might seem a little crazy to you, insurers are more afraid that visitors may trip and hurt themselves resulting in a claim.
As insurers increasingly use data, I believe that intermediaries are going to see a rise in referrals for the risks they present. This doesn’t necessarily mean that it’s going to become harder to get competitive quotes that offer appropriate levels of cover. As non-standard becomes increasingly standard, we’ll see a greater appetite among less recognisable insurers for this business. Last year saw the launch of several new propositions to the market which as well as covering buildings of non-standard construction, also cover business use at home and policyholders with previous bankruptcy or CCJs.
Rather than representing a challenging marketplace for intermediaries seeking household insurance for their clients, I feel the sector is going to become increasingly competitive as non-standard becomes the norm.