Part 1: Are You Getting the Full Picture?

Behaviour Today = Claims Tomorrow

In this article series, FTI Consulting’s Insurance team explore how new behavioural data is generated and early signs of how this data could be the next wave of predictive power for issues like fraud, and maybe even claims costs.

Insurers have long known, and have statistically proven, that a person with prior motor insurance losses is more likely to have a claim in the near future than another person with no prior losses. This feels appropriate and makes intuitive sense.

Society believes a prior loss may have involved poor driving ability or lousy decision-making and that behaviour will carry forward into the future. But the social understanding and the statistical reality are actually very far apart.

A Crucial Unseen Link

What society is not aware of is the reliable link between claims that were not the driver’s fault and any future claims, regardless of fault. There is even a link between a prior claim related to a natural disaster loss and a future claim for collision or theft.

At this point, one may ask how there could possibly be a link between the two events, and therein lies the challenge. We tend to see any ‘link’ between a behaviour and a claim as being related to causality, but this is rarely the case. There is an association with the two events: people with one behaviour are more likely to be in a group of people with another event, even if there is no causal connection.