Meet the Data-Decision Maker

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Welcome to the first in a series of articles specially commissioned to celebrate Thatcham Research’s 50th anniversary.

Join journalist Adrian Holliday as we take a tour around the Thatcham Research business, starting with the data-decision maker, Chief Digital Officer Dan Payne…

Consumers, thanks to big data, are far better informed about where to buy financial services. From car insurance to savings and pension products. Likewise, access to rich data helps insurers position themselves more knowledgably as personalisation and self-service offerings increase: the future commercial opportunities are compelling.

Dan Payne, Chief Digital Officer at Thatcham Research, says that while many of the world’s leading economies transition from the internal combustion engine (ICE) to electric vehicles (EVs), insurers are under huge pressure to prioritise relevant, up-to-the-minute data about the risk – but also to ensure the claims experience remains as smooth as possible.

“From an insurer’s point of view,” he expands, “they’re dealing with a vastly different set of demographics. Although you’ve a changing vehicle parc from a tech point of view, you might have a 17-year-old dealing with the new technology as well as a 90-year-old. Their exposure to technology is completely different.”

Fintech, he adds, makes it increasingly easy for consumers to abandon insurers if a claims experience turns sour. The pressure’s really on. “That’s why,” he says, “a lot of insurers are disrupting, realising that they have to use technology to improve the customer experience.”

High voltage change

The government recently confirmed that company car drivers who pick a pure EV will pay no BIK tax in 2020/21. “That must dramatically increase,” predicts Payne, “the number of cars coming into the UK car parc with fully electrified powertrains.”

“They’re a very different beast to deal with compared to a modern combustion engine car, already supported by a lot of up-to-date but rapidly-evolving safety technology. The underwriting challenge is how to price all the new disruptive technology – which fundamentally changes the risk position.”

An accurate recording of accident information is also paramount. Claim delays can mean more costs such as hire car fees and the risk of legal squabbles. Relying on traditional claims departments to handle initial First Notification of Loss (FNoL) decisions on existing claims structures is increasingly impractical.

“We provide the data a lot of our insurers base their risk and claims decisions on,” Payne explains further. “A big focus for Thatcham Research is giving insurers enough of the right information about the risks they’re exposed to.”

In 2019 that’s not just body panel and ‘finishing’ repairs – it’s advanced technical expertise in Advanced Driver Assistance Systems (ADAS), diagnostics and calibration too.

Relevant and practical for the next decade and beyond

As part of its membership offering, Thatcham Research delivers regular ‘Claim of the Future’ reports which probe the likely impact of new and emerging technology on motor insurers.

“The UK insurer car park is very different. What we want to do is bring that data to life so every insurer can really maximise the value from it. We hope to do that by working with recognised global analytics brands, deploying tools and technologies, so more practical use is made of it.”

Payne says it’s a move which repositions Thatcham Research from an organisation publishing industry reports to a provider of high value data.

Thatcham Research can’t do this by itself. It relies on the co-operation of its members to supply it with the right datasets – frequency and exposure rates are particularly critical – to build the bigger picture. Its insurer members remain a broad church. Many operate niche products addressing specific vehicles, manufacturers or features. One member this year has already launched a policy solely for Electric Vehicles.

Hence the need to make the analytics offering more bespoke and relevant for everyone.

Convenience and risk complexity

Meanwhile carmakers are racing each other to get electric superminis into car showrooms: the new Renault Clio, Peugeot 308 and Vauxhall Corsa – all 2019 mainstream models – will be offered in electric variants in one form or other. Price parity compared to Internal Combustion Engine (ICE) vehicles is still some way off, but the gap’s narrowing.

While great news for consumers, carmakers are still essentially geared towards building and selling cars. They’re not so adept at sharing information about their products, especially when it involves sophisticated, emerging technology.

“The industry model at the moment,” says Payne, “assumes a vehicle is made on a production line and largely doesn’t change. But electric vehicles, for example, don’t need as much regular servicing. Which means the opportunity to derive income from servicing is reduced for the carmaker. So some manufacturers may switch to a model where they’re selling services to the driver.”

In addition, optional monthly subscription agreements might not kick in – perhaps – until a vehicle’s second or third owner. Like performance mapping or convenience and connectivity options, with strictly limited lifespans.

That means the potential for post-crash repair confusion and legal compliance rises, not just for insurers but also for product suppliers and technicians. Almost the whole supply chain, in fact. So the industry faces multiple risk complications, some of which have yet to fully emerge.

AI to help?

It doesn’t take much for repair uncertainty to tip into costly mistakes. But Payne believes artificial intelligence that sensibly digs into existing information bases can support the transition, if deployed with skill and care.

The insurance industry, bear in mind, is always exposed to new technology. The City of London prides itself on rising to new risk challenges. In fact, it’s part of the sector’s job description.

The coming years will see more pronounced shifts in risk modelling, Payne predicts. “Soon after 2021, cars with Automated Driving Systems could well be sharing our motorways with much older vehicles employing absolutely zero driver tech support, in some cases. Not only does this create an increasingly complex underwriting environment, but also a fundamental shift in liability.”

“While these systems will improve road safety, serious road accidents will still occur. So, the accurate provision of collision data to understand who was in control at the time – the car or the driver or a combination of the two – is vital.”

“Delivering meaningful vehicle insight and data services to our insurer members and the wider motor market to ensure cars and their passengers remain safe at all times is a priority. But repairs also must remain cost effective. Our work, I strongly feel, has never been more relevant or necessary.”

Dan Payne, Chief Digital Officer, Thatcham Research