June 17, 2021

Where Is Auto Tech Driving Insurance?

More than half of insurers say they use technology to track the claims process. But that’s just the tip of the telematics iceberg.

Across the insurance spectrum — from underwriting to claims — and into the consumer base, interest in digital tools, usage-based policies and other tech-driven innovations are drawing attention. With the ability to improve underwriting, in turn, providing drivers with more accurate rates, and enhancements to the claims process, that interest isn’t without just cause.

As seen across industries during the pandemic, digital adoption trends have accelerated at an ever-hastening pace, and insurance is no different. As with most business decisions, these moves are largely driven by consumer demand.

Part of the push is from the increasing willingness of insureds to share personal data for better rates, according to CCC Information Services, Inc.‘s Crash Course report. The study found 54 percent of drivers are now comfortable sharing information on miles driven for pricing compared with 41 percent in 2019. Further, nearly 60 percent said they are comfortable sharing distracted driving details, while almost half would reveal speed and location data.

Propelling some of this activity is the fact that many drove fewer miles during the past year due to the pandemic.

In fact, a sizeable portion of drivers are already leveraging these tools as 56 percent having submitted a claim online, and 51 percent have used new technology to track the claims process.

Further, more than three-quarters of consumers report trust in automotive claims and repairs handled entirely by artificial intelligence (AI), according to a survey from Solera.

Highlighting the importance of technology in the future of personal auto claims, two-thirds of survey respondents said they would switch insurers to access faster digital experiences. On top of this, 73 percent said they would choose an insurer that leverages AI to process claims quicker.

Faster, simpler communications that utilize AI-enabled texting can also lead to more delighted policyholders, according to Mike Green, CEO and Co-founder of intelligent conversation platform Hi Marley. “Almost 40 percent of people consider switching insurers after a claim. Regularly communicating with policyholders makes them more likely to stay put as well as tell a friend about their experiences.”

Strong chains of communication can also lead to shorter cycle times in claims, helping reduce costs, Green said, explaining: “Just by avoiding phone tag and things like that, it can mean the insured spends less time in a rental car because they can get them back into their own faster. It also means less time to ponder hiring an attorney if someone isn’t getting back to them in time.”

A combination of more willing consumers and the accelerated pace of digital adoption during the pandemic is poised to turbocharge the North American telematics market, which is anticipated to experience nearly 30% growth, compounded annually, by 2024, according to ResearchandMarkets.com.

Enhancing claims

In addition to satisfying customers’ demands, data from telematics devices can improve risk analysis and the claims process, according to Andy Yohn, product lead for Duck Creek Technologies. New data points can be used, for example, in crash recreation.

“The telematics, or ‘black box’ will indicate additional data points to help understand the incident,” he said. “At some point, there could be machine learning to look at an image and give estimates as to what happened.”

Further, photo and video evidence can speed up the claims process by giving exacting details at critical points in the decision-making process.

“Not only can I make an estimate, but I can look at a photo or video and see if it is going to be a total loss. For example, if I can see extensive damage to the roof of a vehicle, I know it is going to be totaled,” he said. “Understanding it will be a total loss and how soon I can know that will guide how to adjudicate the claim. It is not just financial decisions, but workflow decisions based on intelligence from a photo.”

Echoing this, Andrew Brown-Allen, Chief Marketing Officer and Shareholder with Insurance & Mobility Solutions (IMS), said speeding up claims, clarifying liability disputes and fairer settlements will also be big uses for new auto technology.

Concerning the final point, Allen-Brown said telematics and new data sets could provide fairer rates, but the days of strictly usage-based insurance (UBI) premiums are not near.

“It is difficult to argue that wouldn’t be the fairest way,” he said. “UBI has been around for a while, going on nearly two decades, but even markets such as Italy, where UBI has the highest penetration, those rates are only in the mid-to high-teens. In the US, UK, and parts of Europe, penetration rates for UBI are still stuck in the single digits, so we have far to go.”

On-boarding new data sets

The improving efficacy of data is leading to a shift from companies and carriers that have historically been leaders in telematics to a wider pool of users across the insurance industry, according to John Chalfant, Senior Product Manager of the US connected car team at LexisNexis Risk Solutions. He notes that as telematics solutions become more accessible, the more they will be embraced across the industry’s supply chain.

“Carriers want to see the proof, and what we are seeing from the market is they are finding value in the improved predictiveness of this data,” Chalfant said. “The market understands the value of how this really improves insights in driving behavior, not as a proxy set, but a true driving data set.”

One emerging innovation set to open a new wealth of driving data is connected cars. However, we aren’t to the point where connected cars comprise the bulk of vehicles on the road.

“Obviously, connected vehicle data is increasing as more roll off assembly lines, but right now, there is still a need for aftermarket devices,” he said.

While the source is relatively new, data collected from connected cars will be familiar to insurance professionals, as it is “very standard,” Chalfant said. However, as the connected car data set continues to grow, the information collected will become richer.

Barriers to adoption

Despite consumers’ wishes, the cost to update legacy systems was cited by auto insurers as the most common reason new technology hasn’t been integrated. Additionally, larger insurers are reporting speed to market, upskilling staff and scalability of platforms are among the most pressing challenges when attempting to adopt automated AI systems, Solera reported.

“We’ve reached a point where leading companies are placing top priority on adapting and integrating cutting edge technology to differentiate and optimize the customer experience. Those that don’t will face competitive challenges,” Evan Davies, Solera Chief Technology Officer, said in a release. “Finding the right blend of data and technology is the key to optimizing investments to unlock speed, intelligence, and efficiency at scale. Only then can our industry see the highest return on digitization through a faster, more accurate repair claims process.”

At IMS, the mantra has always been “the data in and of itself will not change outcomes,” Brown-Allen said. “It requires the intelligent use of that data to change outcomes.”

For telematics and other tech to truly change driving risks, engagement must meet a level where behavior modification occurs, he said.

“From the carriers we talk to, they might be successful at getting early-stage, light-touch adoption of these new technologies, but to really drive a better outcome requires a deep level of engagement few have mastered so far,” Brown-Allen said. “It is more than downloading an app and driving well for a few weeks. It is about how they drive on day 363. It is about truly impacting behavior, which will impact claims.”

To this end, IMS researched the topic and how the proposition is framed might be critical to buy-in. Brown-Allen explained if you asked 100 people if they would want an in-car device that could detect a collision, offer roadside help and contact their insurer, 90 percent would be interested. The same would not be true if asked about interest in a device that tells them if they are a “good or bad driver.”

“It is less about usage and more about providing the service for a reason. In this case, it is that moment of truth when an insured is involved in a crash,” he said. “That is sort of untapped gold, but people are starting to catch on.”

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