For legal expenses insurers, the question of previous insurers and previous claims in the application is essential, as it enables risk-adequate pricing and the rejection of so-called insurance hoppers and other customers who are likely to incur high claims expenses. Until now, it has been difficult to find out more about the reasons for a switch without honest information from the insured person. At a time when legal expenses insurance is increasingly transforming into a re-covering market, legal expenses insurers are facing unprecedented pressure on costs and efficiency: Claims fishing, a shortage of skilled labour and a rapidly changing legal services market are all contributing factors. This makes it all the more important for the industry to correctly classify its own customers and their behaviour and to price new contracts in a risk-adequate manner.
Calculating risk-adequate premiums more easily
Evaluations have shown that the application process itself is in need of optimisation: For insurers, calculating risk-adequate premiums is both an essential core task and a constant necessary for survival. In legal expenses insurance, the decisive parameter for this is the enquiry as to whether there was previous insurance and to what extent it was utilised. Here, however, insurers have to rely on a sometimes dubious source of information: customer details. Until now, this information could neither be scrutinised nor systematically checked. While this represented a high risk for insurance companies, false information is not only virtually risk-free for the applicant, but also enables them to conclude contracts at lower costs.
