It’s early days for some of the most sophisticated technology solutions available for auto insurance, but not because there are so few companies adopting technology solutions. It’s because an increasing number of insurers now have the vision to combine certain key technologies to create an ideal customer experience.
Consider that by 2020 there will be 50 million telematics-enabled vehicles on the road in the United States with market penetration expected to exceed 70 percent by 2023. Or that research from the Pew Research Center shows the share of Americans who own smartphones has reached an estimated 81 percent. A fair amount of consumers rely primarily on this mobile channel to communicate, take photos and find their way around. And, with the rise of the Internet of Things, mobile and AI, customers shop, pay bills, request a rideshare or make a reservation with a simple click.
In auto property damage (APD) claims, the evolution of connected device and telematics data now makes it possible to know about the energy, impact and severity of a crash in real time. And with more lines of code than in the space shuttle, new vehicle advanced auto safety systems (ADAS) are also evolving. The downside, of course, is that these vehicles are more expensive to repair, and in some cases, can become total losses more quickly. And with roughly 23 million auto accidents still occurring per year, it’s obvious that it’s early days for drivers of these vehicles, too, as they become accustomed to working in partnership with these new systems.
Over the past year at various insurance technology conferences, the leading auto insurers have pulled back their covers to reveal innovation tied to today’s auto insurance customer’s expectations, which are changing fast. There are some insurers with a vision for the future, engaging and empowering their customers’ 24/7 self-service lifestyle and real-time access to information, especially when it comes to claims, notes Mark Breading, partner and chief research officer with SMA.
Breading points to Allstate’s 2017 initiative to eliminate 500 drive-in claims centers and move to mobile claims processing. “All of the tier 1 carriers are rethinking claims and almost all have mobile capabilities for First Notice of Loss,” he says. “Some people want to use mobile to report and some are more comfortable calling an agent, so it’s a matter of understanding what your customer wants and then meeting those varied requirements.”
As a founding member of the Illinois Autonomous Vehicles Association, State Farm has placed itself at the center of the automated mobility revolution, betting on the future of connected cars that talk to other cars, road sensors, traffic signals and more. In fact, State Farm has gone on record stating that, as automated mobility becomes more the norm, the company’s attitude about autonomous vehicles has shifted from threat to opportunity as they seek a better understanding of how converging technologies can affect everything from coverage realities to underwriting and claims.
Big Steps
Farmers is another example of a company that is taking big steps to meeting changing expectations, and with a 91-year history steeped in tradition, perhaps a surprising candidate for the current future state of IoT/telematics and mobility-enabled claims.
Farmers’ leanings toward innovation within the APD space has captured the attention of industry experts, chiefly because the company has taken steady steps toward a lofty goal: putting the customer at the center of the claims experience. One of those steps involved a review of its entire claims functional business unit.
The review revealed what many Tier 1 carriers currently still experience: process bottlenecks, multiple touch points, and efficiency challenges related to either siloed or legacy technologies. To address these challenges, the insurer has revamped its claims area: implementation of a technology solution strategy that would replace its back-end core claims systems and a combination of mobile, AI and telematics to create a digital end-to-end safety experience for its customers. As well, the carrier has established additional relationships that provide the customer with digital tools such as mobile apps, web access and text alerts to offer transparency into the status of their APD claim.
Rethinking the Approach
“Ultimately, to improve claims outcomes and sustain customer lifetime loyalty, it requires an overhaul like this, but not many have gone as far as Farmers,” says Breading. “This is an end-to-end process for them, and it will ultimately involve technology and the entire ecosystem.”
Ken Hudson, Farmers’ Director of Auto Strategy, says that over the past few years, the company recognized an acceleration in changes related to consumer behavior. “Changing expectations of service providers is driven by adoption of mobile technologies like smartphones, where the customer can interact all the time. We know customers are comparing their experience not just to other insurers, but to companies like Amazon.”
Along with the insurer’s claims area overhaul, Hudson says Farmers’ has applied a “test and learn” pilot approach to the claims process itself. “Because our customers want to interact with us digitally, we are putting things in place so they can reach us when and where they want. We ask ourselves: What problem are we trying to solve, what changes are we trying to make? We start small with a pilot group of customers, get feedback and then adjust. We want to elicit trust and lifetime loyalty from the policyholder, so this has gone into every aspect of our claims processes, including digital claims processing.”
Hudson says Farmers is pairing its customer feedback with changes in new vehicle technologies to develop a forward-thinking strategy. “The car isn’t just four wheels and a motor anymore,” Hudson says, “and it’s obvious we have the ability to use connected car data in the future. The sooner we recognize the evolution and complexity in auto technologies and leverage the car’s technology, the better able we are to adjust how we deliver on the customer’s requirements and process claims.”
To Breading’s point about customers’ varied requirements, insurers such as Farmers now face how to best service the claimant with a digital end-to-end approach. “This speaks to the coming evolution of combining vehicle telematics with big data and analytics,” he says.
Most large carriers see telematics and mobile connectivity as ingredients to their claims’ strategy. And technology providers like CCC Information Services see things similarly. CCC partnered with Volvo Cars USA to launch Accident Advisor this year, combineing emergency services and checklists and to facilitate the transfer of crash data from telematics-enabled connected cars to automakers in real-time. CCC, through its CCC X data exchange, turns that information into opportunities for automakers to connect with their vehicle owners via their smartphones, and digitally connect them with participating insurers and collision repairers. The solution even includes a locator map to shops in the geographic area.
The notion that mobile and telematics technologies can be used to cement an end-to-end digital experience for the customer is held by most larger auto insurers. What’s unique so far, however, is Farmers' decision to move forward with AI at key decision points on the back end of the claims process to create new levels of physical damage estimating accuracy and cycle time reductions for less severe claims.
“We use AI to make some decisions about a vehicle’s damage, including heatmapping technologies, which help inform decisions around severity and repairability,” Hudson says. Heatmaps use computer vision technology and AI-powered capabilities to detect and depict vehicle damage. The resulting AI-generated estimate is passed to a claims rep who reviews, vets and edits as needed. Claims reps are making better decisions based on accurate data, the claim is handled more quickly, faster culmination of the claim, and higher customer satisfaction as a result, adds Hudson.
Flipping the Switch
“Vehicle complexity and rising repair costs present an opportunity for insurers to flip the switch on a 100-year-old process and achieve operational excellence while delivering a modern, differentiated claims experience to policyholders,” says Jason Verlen, SVP Product Management at CCC. “We are already asking the claimant to take photos, we have a host of data sources related to the vehicle, such as the ADAS system, and we have data from more than 200 million claims at our disposal,” he adds. “Now we can offer estimating logic and AI photo analytics capabilities to pre-populate an estimate with suggestions for human estimators to review, edit, and advance.”
The industry’s use of “smart” estimates that use AI are yielding promising results among appraisers, notes Verlen. “Some carriers are seeing a 25 percent improvement, and it’s early days on this.”
However, the use of mobile and AI-based photo estimates has increased 400 percent in the last nine months, adds Verlen. “Electronic parts ordering from the repair shops are also way up, so we are seeing accuracy and speed in getting the parts, which makes for a better consumer experience. The digitization of the process is happening.”
Breading points out that many insurers are looking to create a unified customer experience. “It’s around customer demand, but it’s also telematics/IoT, AI and leveraging the mobile channel, all of which have been talked about for a while, but until now not combined with this level of sophistication and acceptance. So, it’s early in the evolution, yes, but these are real solutions in the market being used by the largest carriers.”
Breading adds that the larger companies may be setting the pace, but that smaller carriers can follow if they move to a modern claims system, automate most of their workflow processes, and embrace AI, telematics and mobile technologies as a way forward. “A combination of workforce demographics—coupled with natural resistance—will occur, but the opportunities are there.”
