The P&C personal lines industry is in the midst of a technological and distribution revolution. Younger customers want to shop for and manage their insurance relationship online like they do for other aspects of their lives. And an increasing number of major carriers are moving to give them what they want.
Unfortunately, the first carriers to launch direct channels experienced losses equalling 120% of net premiums written largely due to unprecedented levels of fraud online. To succeed in the online market, carriers must find ways to address and limit this fraud. Coincidentally VeracityID has been working with a major industry competitor for four yers to design tools to identify, intervene and resolve man fr aud conditions. In fact the current version of idFusion has shown it can cut 30 points of fraud and misrepresentation, making the direct channel viable.
Over the past few years quite a few US auto insurance carriers have implemented direct, online distribution channels. Their goals have been to both capture a greater share of younger consumers who prefer transacting online, reduce distribution costs and claw back market share from the industry’s leaders: Progressive and Geico.
Thus far the results have been consistently bad.
The typical loss experience for new direct auto business has been far worse than they expected causing some carriers to back out of the market and others to throttle back their volumes. Yet even more carriers have announced plans to do so.
Over this time frame VeracityID has been working with a major carrier’s online channel to identify the sources of excess loss and build solutions to mitigate them. We have found that there five key fraud types that account for fully 30 points of direct, online channel losses and have built that constitute fully 30 points building solutions that identify, intervene and resolve the major fraud conditions that drive excess direct channel losses. The cumulative result has been a 30 point reduction in loss ratios. And we’ve learned some lessons that we’d like to share.
Embed SIU insights into UW and Claims processes.
Price for profit day one – seasoning is dead
Take action during the live transaction – afterwards is too late
Assume everything is non-standard
Micro target underwriting to evolving market conditions
- Quote manipulation
- Pre-existing damage claims
- Serial non-payers
- Ghost brokers
- Ineligible vehicles, persons and coverages