Research by the Consumer Credit Rating Agency found that 48% of UK households have recently experienced a change in income. This was most often due to being on leave (14%), lower pay (11%), loss of a job (11%) or new benefits (11%).
TransUnion UK Insurance Director Colin Wallace said: ‘As the lockdown lifts, we continue to see a polarized financial picture among UK consumers, with optimism in some neighborhoods contrasting with a minority. important person who is still struggling to pay her bills and see her income change. regularly.
“For the insurance industry, this uncertainty makes it more important to obtain a comprehensive picture of an individual’s financial situation, in order to help insurers perform informed risk assessments and increase value at life.
Additionally, the financial uncertainty caused by the pandemic for insurers means that traditional data sources can flag clients as low risk who may in fact be struggling with their income. As such, the study found that one in five UK households say they expect not to be able to meet at least one of their current bills or pay a loan.
Conversely, some potential clients reported as high risk may have seen their situation improve due to a drop in their cost of living during confinement. In fact, 16% say they have paid off their debts faster in recent months.
The research also highlighted the implementation of impending Financial Conduct Authority price market regulation, which it says “will likely make footprint growth more expensive.” This is due to tighter controls on incentives and price reductions offered to new customers compared to existing customers. For this reason, he says that a “data-driven understanding” of the quote pool will be essential in identifying growth opportunities.
The study added that other “fair value” considerations for installment clients have the potential to reduce income unless they are offset elsewhere. As such, a targeted risk selection process may have a greater role to play in ensuring that new clients provide greater value to insurers over the long term.
Wallace added: “The current regulatory situation – combined with the uncertainty of Covidf-19 – makes it more difficult to offset the cost to attract business. In response, insurers will prioritize rebuilding their risk models with more power and precision. It will be critical for the industry to use accurate data and information to help them target clients appropriately and with confidence by providing them with more installment financing options. “
On top of that, there is greater regulatory pressure to ensure affordability checks are performed on all installment clients. This need to balance this requirement, along with making the right business decisions, means insurers will need to redouble their efforts to meet credit histories that improve or decline over time.