Why automated claims processing and fraud detection are crucial to startup insurers

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Metromile, an insurance startup offering per-mile auto insurance, is growing fast while trying to stand out and offer an alternative in a crowded field of car insurers in the U.S. CEO Dan Preston shared some insight on how it’s trying to do that with its several customer touchpoints, while discussing his company’s journey in an extended conversation with Digital Insurance editor-in-chief Nathan Golia late last year. Here are some of his remarks (which have been edited for brevity and clarity):

On the claims experience (Metromile launched an automated claims service on the date of Digital Insurance’s visit):

Dan Preston: The core concept behind it is that we’re trying to make the claims experience exceptionally easy, very seamless, and also very fast. … For many of our claims we’ll adjust it within an hour, so you’ll get paid out, in some cases, within an hour and in many cases by the end of the day.
We have a proprietary algorithm in the background that measures the type of claim that it is and whether or not we should just automatically pay for it. With that, that’s what decides whether or not there’s a seamless, easy claims experience there. And if [the algorithm] decides not to do that, then [the claim] will go through a more traditional process. You’ll still be able to file it online. The goal is to ask the questions [we] need to, not every question [we] can possibly think of. If you’ve been through a claim, I think oftentimes you’ll find that there’s like a script and there’s a couple of dozen questions you get asked. Many times you don’t need to ask all them.

On the need for a top-notch customer experience as a startup insurer:

Preston: We don’t have the kind of marketing [capabilities] that a lot of the big companies do. So that’s why we spend so much time thinking about the experience and [making] it really, really seamless. The discount is the hook, but then the rest of it has to be extremely easy. So going through the quote process, the claims process, all this stuff is geared toward creating both an engaging but a super, super simple experience that you don’t have that kind of feeling.

How the company’s strategy for collecting data feeds that goal:

Preston: With a traditional like trial-based program, you plug in a device for some period of time and then you get your discount. With our product, once you sign up, the policy instantly works. So you don’t actually have to wait for your device for it to have your policy actually come in force. It works day one. So because it turns on day one, there’s no actual friction until you get the device in the mail. By that point you’re already insured. So we actually don’t have the issue of the device being a barrier to actually [enrolling].
You do want to make sure that once they get the device, they’re not confused, and it’s easy to understand. And the [UBI concept] is already new, so there’s a lot of education. So we spent a lot of time in building the right kind of box, the right kind of leaflet inside to make sure that it’s customized to the car and you know where to plug it in and all that kind of stuff.

On managing fraud:

Preston: Insurance is a challenging world, [and with] any period of sustained growth, you’re going to incur a bunch of fraudulent losses and that’s just the nature of the industry. And so we’ve had to be … really smart about claims, making sure that we’re capturing all the right data, build[ing] the kind of team that’s dealt with this before. We have a few folks in like the special investigations unit that were like pioneers in the industry
We focus a lot on ensuring that the device is exceptionally secure. One of the most critical things about maintain device security is that all of your updates, all the updates are signed and delivered over SSL. It just ensures that you can’t just over the air update devices. So we’ve spent a lot of time making sure that all of those processes are sort of buckled down and make sure that everything is encrypted. So it’s been a focus for me and for us.

On using smartphones or other non-dongle devices to collect data:

Preston: The biggest challenge in offering per-mile product on the phone rather than a device is that we need to make sure that we capture all miles. It’s a disjointed customer experience too, when you only capture some data. When you miss like 10 percent or it’s off by 30 percent, it’s not the full experience. In addition, Apple and Google are making it really easy for customers to have more control over their data capture. I actually don’t think customers will be as willing to let apps like insurance just track data all the time on their phone.

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