Telematics' value to insurers evolves
Telematics-based insurance policies are growing slowly. According to Harry Huberty, lead associate with Novarica, overall participation for telematics-fueled usage-based insurance remains modest. “About one-third of property and casualty carriers have telematics capabilities live or in pilot, and only about a third of their policyholders participate in those programs,” he says.
The lull in the space is providing other market opportunities for both insurers and vendors, especially around claims, according to Huberty. “We are seeing insurers looking beyond traditional behavior-based, pay-as-you-drive auto insurance options to target services that are enabled or closely aligned with telematics, especially around claims," he says.
While seeking to uncover the potential value of UBI among consumers, Cambridge Mobile Telematics (CMT) uncovered powerful sentiment about the role of telematics in consumer loyalty. The company surveyed 700 U.S. drivers and shared its findings, which reveal that the majority of respondents (73 percent) want their auto insurance rates to correlate with how safely they drive, but less than 22 percent of the drivers surveyed have been offered a behavior-based smartphone telematics program by their insurer.
According to the CMT report, “the urgency for auto insurers to take a new approach remains extremely high,” as evidenced by survey responses to the question about under which situation a policyholder would consider switching providers:
· 75 percent said a significant price increase;
· 62 percent said poor customer service;
· 56 percent said a failure to quickly and effectively address claims;
· 54 percent said not receiving a fair payout from claims;
· 47 percent said lack of transparency into rate increases and pricing.
It’s evident that such services are consistent with the CMT results above (three out of five responses relate to dissatisfaction with claims and/or customer service), but also reflect changes in consumer demands and transformative changes taking place within the auto industry (connected car, shared vehicle ownership, ridesharing, and ultimately autonomous driving).
Quoting its J.D. Power 2018 Insurance Digital Experience Study, Tom Super, director of the firm’s Property & Casualty Insurance Practice, says that, while insurers have succeeded in creating attractive digital user interfaces, they have lagged when it comes to core insurance functionality. “Most insurers’ digital offerings are lacking in insurance-specific capabilities such as processing claims, effective shopping and servicing of policies. As consumers increasingly expect to interact seamlessly with an insurance brand—regardless of the channel—most insurers are falling short on digital capabilities.”
In the auto claims area, this is especially important, not just because there are so many stakeholders and moving parts to a claim’s resolution, but because the entire digital footprint within an insurer’s claims business unit is morphing to include mobile, IoT, connected car (telematics), analytics, artificial intelligence, chatbots, and a resulting obviation of manual processes that have been in place for 100 years or more.
Telematics Also Driving Customer Loyalty
“The internal changes to an insurer’s workflow play forward to significant process improvements and efficiency gains, but as important, these changes allow the insurer to provide the type of services that drive lifetime customer loyalty,” says Jason Verlen of CCC Information Services Inc., which processes a majority of all U.S. auto claims annually. “Those changes include the ability to apply AI to photos for more efficient estimating and telematics data to detect damage, setting an alert tagged to view the rate of change the vehicle is experiencing and determining in real time that there has been an accident.”
Verlen explains that insurers can now apply AI-driven conversations via chatbots with customers at scale, in real time, to guide them through the claims process after an accident occurs. “A chatbot asks the claimant for a photograph—an automated, back-end review determines suitability of the photograph, enabling the insurer to determine with high accuracy and in real time whether the vehicle is likely to be a total loss or repairable and then advises the policyholder accordingly. Fast, transparent communication.”
Novarica’s Huberty agrees that using telematics to improve customer loyalty is key, but maintains that customer contact is something insurers may not always consider when they’re contemplating creating telematics programs. “Our research has shown that one of the best benefits is increased loyalty from good customers, although those benefits don’t necessarily lend themselves to metrics the same way year-over-year changes in loss ratios do. You really want to drive both.”
First-Movers Already Seeing Positive Results
Verlen adds that telematics-enabled claims is setting the stage for a series of firsts in exceeding customer expectations and driving down costs: “Thanks to automatic crash detection, the claimant is now being approached proactively by the insurer at the time of the auto accident,” he says. “When you combine mobile solutions, the benefits of other new sources of instant and historical data, telematics, analytics and heatmaps, the insurer can also make critical FNOL triage decisions using a single photo, including total loss detection. This helps point the claimant in the right direction, to the scrapyard versus the repair shop, and saves the back-end estimator time and labor.”
Estimates become more accurate and credible thanks to telematics data that is used to detect location and severity of the damage, automatically comparing it to millions of collision variables and applying predictive, model-driven AI. Heat maps used as visible illustrations of the damage build further credibility with the policyholder.
State Auto Insurance Companies recognized the demand for this type of customer service, and working with CCC, used telematics data to automatically detect its first crash back in April.
With assets of $4.6 billion, and $2 billion in premiums in 33 states, the 100-year-old insurer has business objectives tied to a vision to establish a full digital experience for the enterprise. State Auto’s first focus was on finding a way to deliver a better experience to the customer.
“We quickly saw on the claims side that if we didn’t service the customer digitally, we’d fall back,” says Josh Thompson, vice president of Auto and Property Claims at State Auto. “For years, the industry has been picked on, and sometimes rightfully so, for not fulfilling its claims promises, and when you talked to any policyholder from any insurance company who had experienced a claim, they would express frustration and sometimes disgust,” says Thompson. “So, we focused on ways to show the customer we are there to help rather than create frustration. If we reach out proactively at the time of the accident and ask, ‘hey, do you need to file a claim?’ we are following through on our promise”.
As part of its larger digital vision, the insurer then studied applying telematics to the claims experience. “During our evaluation, we saw a way to flip the claims process on its head,” says Thompson. “Instead of having the claimant notify us when they have an accident, we notify them.”
CCC ingests telematics data captured by Octo Telematics, a device-based data collection provider. The data is integrated within CCC’s claims systems in real time, where CCC employs an AI algorithm that detects and instantly reports auto physical damage occurrences, location and severity. “When an auto accident occurs, we get a notice,” Thompson says. “This happens in a matter of seconds, allowing us to conduct claims triage.”
Thompson admits that as one of the first insurers to extend their UBI program in order to provide this service, State Auto faced a “wait and see” result, and since April, the insurer has processed hundreds of crash detections, including total loss. The few early false positives in crash detection (minor non-reportable damage) have been replaced with a system that learns from itself, now spitting out highly accurate detections.
“We also figured out there were secondary benefits, customer satisfaction among them,” says Thompson. “For example, almost all of our customers actually want us to contact them and offer our help at the time of the accident.”
On the casualty side, telematics-enabled crash information (identification of vehicle, location, speed, braking and steering movements) is combined with transmission of Delta-V force data to help determine impact severity and injury potential of driver and occupants.
“Consumers say a discount for good driving isn’t as important as the services that telematics can extend, such as using digital technologies to simplify the claims experience, call ahead to the towing and rental car companies and get a rental car in an hour for example,” Huberty notes. “That experience also provides real value and extends the relationship.”
Telematics, Digital Leading to Transformation
In the past, providing white-glove treatment, high touch, specialized claims customer service was costly, says Verlen. “It meant more people answering phones or in the field, and the ongoing interplay between adjusters, estimators, and claims reps, and so on, so carriers had to choose between an excellent experience or an effective cost model. Digitization, telematics and self-service: these combine to provide both.”
While some insurers will continue to struggle to match consumer demand with exemplary digital customer service such as that provided by Amazon, Netflix and Uber, notes J.D. Power’s Super, there are leaders offering direction in how to get there. “Auto insurers looking to differentiate and win new customers are making big bets with digital — such as in personalization — that meet customers’ growing expectations for improved interactions.”