How automatisation is saving car insurers millions

Have you ever considered the financial impact on your bottom line of errors and delays when users manually file car insurance claims? What about the impact of a bad user experience when filing a claim — the “make or break” moment when it comes to customer loyalty — on customer satisfaction, acquisition and retention?

Increasing evidence shows that the human errors made when manually filing a car insurance claim and the user’s experience when doing so are both integral to the financial success or failure of a car insurance service.

In this article we’re going to be looking into the problems which occur when relying on users to report accidents manually as well as the financial impact that human error has on the car insurance industry. In addition we’ll be examining the high price car insurers are paying when they offer a poor or inefficient user experience when a claim is made.

“We believe that effective, efficient claims management is central to the success — or failure — of European motor insurance models. Recognising this, a number of European insurers have started to give claims management greater priority, and are increasing their investment in technology and training.”

• Ernst and Young, “European motor claims — Is customer satisfaction enough?”

Finally we’ll be making the case for the automatisation of accident detection, verification and reporting as a solution to both reducing human error and improving the user experience during the process of filing an insurance claim after an incident, and how this automatisation will save you money and keep your customers loyal.

Why are we so interested in automatisation? As a platform for car data we seek to make it easier for mobility services to connect to car data and enable them to offer their customers the most efficient, cost-effective and user-centric service possible.

Let’s start with the first point: human error when filing a claim.

What are the most common problems — and their costs — with manually-filed car insurance claims?

As anyone in the industry will tell you, some of the costliest processes for a car insurance provider involve handling claims. Claims are, of course, a major service function of any insurer but the processing and handling of claims can become a major financial drain if not handled in a time- and cost-effective manner. Let’s take a closer look at some of the broader issues that are costing car insurance providers so much money:

I. False reporting

The false reporting of a car accident is an inevitable side effect of a car insurance claims process that relies on the victim of an incident to accurately report details of what has occurred. Human error in such circumstances is normal. However, while falsehoods about time, place and the scope of the accident may not be intentional on the part of the user, the outcome is the same as if it were. Reports from the user must be verified by an adjuster, who will need to examine the vehicle. This requires time and considerable resources from the insurer.

“In some instances a legitimate claim may be tainted because certain facts have been exaggerated. Meanwhile, it can be hard for an insurer to distinguish between intentional deception or a mistake.” — Insurance Fraud Taskforce, Interim Report

II. Unreported incidents

When an insurer is relying on the car user to manually report their accident, there is also a risk of that event not being reported at all. If the driver of the vehicle chooses not to report an incident, the insurer has no way of knowing anything has happened.

III. Delayed reporting

In other cases the report might be delayed, by which time evidence to support the claim (vehicle damage or personal injury) is less reliable than if the claim had been filed immediately. Delays in reporting are common. If a person has had a car accident, their first priority may not be the insurance, so much as the welfare of the passengers. However, delays in reporting even by mere minutes can make a huge impact on the claim, and the insurer’s costs. A delay in the FNOL (First Notice of Loss) of more than 30 minutes can result in an additional $800 being added to a person’s claim. The average cost of a claims process can rise by a full third if the event is reported after 24 hours has passed.

IV. Fraud

Perhaps the most persuasive argument against an insurance claims process which relies on the user to provide accurate information of the incident is car insurance fraud. AXA UK in their 2016 report writes — “Staged road accidents, also known as ‘crash for cash’ accidents, are one of the most visible signs of a growing culture of fraud. The IFB estimates that the cost of fraudulent organised motor insurance claims alone is £392 million each year and that as many as 1-in-7 personal injury claims are connected to a suspected ‘crash for cash’ scam.” Fraud can range in scope from opportunistic claims, through to claims for phantom passengers and fictitious injuries in road accidents, to the work of highly organised crime rings. Since fraudulent claims only account for 10% of claims, the cost of discovering them for many insurers might not be as high as simply covering them, which of course only exacerbates the problem, encourages fraudsters to continue and increases the premiums paid by honest policy holders. According to the Coalition Against Insurance Fraud personal-lines auto insurers lose at least $29 billion a year in premium leakage. This involves missing or wrong information that drivers provide insurers, which inaccurately lowers auto premiums. Among the sources of losses:

• $10 billion (unrecognised drivers).
• $5.4 billion (underestimated mileage).
• $3.4 billion (violations/accidents).
• $2.9 billion (false garaging to lower premiums).”

— Coalition Against Insurance Fraud, By the numbers: fraud statistics

It’s not only the misreporting of incidents in and of themselves that is hugely financially damaging to a car insurer; the use of customer-entered information to assess risk and offer insurance against that risk on a mass scale is losing insurers significant sums of money in the long term. This is because a car insurer is essentially reliant on this collection of information to make long term policy decisions and design new products. When that information is inaccurate the insurance and products offered to customers do not fit. Companies are making crucial decisions using information that, as we have seen, cannot easily be verified and could indeed be fraudulent.

Now that we have an idea of the huge cost inflicted upon car insurers thanks to the human errors and fraudulent claims that can easily slip through the net when users manually file an insurance claim, let’s take a look at the UX of reporting an incident and filing a claim and how this also significantly impacts the bottom line.

Bad UX = customers lost

Studies have found that insurance companies are losing long-standing customers by neglecting to offer a streamlined or customer-centric claims filing process. What insurance companies need to realise is that customer loyalty is increasingly dependent not just on a good product, but also on a positive interaction when a claim is made. As we have seen, a motor insurer’s largest spend, in terms of both indemnity losses and operating expenses is handling claims. Understandably then, many insurers seek to keep these costs as low as possible and carefully monitored. An indirect consequence of this frugal approach, however, is that the quality of customer service remains low and commoditisation is reinforced; all to the detriment of the customer.

What some European insurers are now realising is the opportunity that technology offers both in terms of a.) an effective and streamlined customer service and b.) keeping customer service costs low. Most importantly, the advantage that a streamlined and user-centric application or service can bring to their claims process is keeping customers satisfied and customer retention rates high.

“As traditional industry borders fall away, the future of insurance stands to be greatly influenced by platforms and ecosystems.” — McKinsey&Company, Digital Insurance in 2018 — Driving real impact with digital and analytics

Having a car accident, however minor, is rarely going to be an enjoyable experience. Whether it’s a simple ‘fender bender’ or a head-on crash with another vehicle, these incidents are always going to be highly stressful for everyone involved. Even in the case of a minor bump, the driver must endure the arduous process of filing the incident with their insurance company, recount what happened, and organise repairs. In the case of a more serious accident, emergency services need to be notified and sent to the scene, and the driver — or whomever is capable — providing details of the location and the scope of the accident to a telephone operator. Imagine, then, how it would feel after an experience like the one described to then be at the mercy of an inefficient claims process.

“Making a claim is a “make or break” moment when it comes to customer loyalty. Knowledgeable staff and good customer communication is a key element of success, and can have a significant impact on retention costs.” — Ernst and Young, European motor claims — Is customer satisfaction enough?

Customer expectations of car services are changing. Long gone are the days when a driver expects to put through an insurance claim that takes weeks to process, or that requires a phone call or inspection of the vehicle. Now, when selecting an insurance broker for their vehicle, drivers expect to not only access and select product information and offers on their smartphones, but in addition they expect to file their insurance claims digitally and seamlessly too.

“The goal must be to meet customers’ expectations, which have been transformed by digital technology. Customers want simplicity — one-click shopping, for example. They want 24-hour access and quick delivery, clear, relevant information about a product’s features, particularly in relation to pricing, and innovative, tailored services designed for the digital age. They have the same expectations whatever the service provider, insurers included.” — McKinsey&Company — Facing Digital Reality

As we shall see, for an insurance provider, this change in customer expectations is an opportunity to get ahead of competitors. By offering a service that encompasses products, tariffs, and the filing and processing of claims you can increase customer satisfaction by meeting these expectations and offer significantly faster processing times. From the side of the insurance provider, the faster data is collected and processed, the more money they stand to save.

How automatisation can reduce manual errors, speed up the claims process, prevent fraud and improve UX

“The insurance industry is in the midst of a radical, digitally infused shake-up. Customers are embracing digital channels, and technologies such as the connected car… have ushered in an era of new products built on data and analytics.” — McKinsey&Company, Digital Insurance in 2018 — Driving real impact with digital and analytics

A highly effective solution to both reducing manual errors made by the customer when filing a car insurance claim — whether fraudulent or wholly unintentional — and improving the experience a user has when filing a claim is through the automatisation of the entire process.

With connected cars, information for the claim is taken directly from the vehicle — from location, to scope of accident, dates, times and much more — so the claim does not rely on human evidence or an adjuster’s validation of that evidence. This automatisation also takes considerable stress off the user, who does not have to think about collecting information for their claim, speak to a customer service operator or complete lengthy forms. Using a simple app a pre-filled out claim with information about the accident can be filed at the touch of a button.

The Auto API makes car data accessible

Imagine getting an update as soon as a linked vehicle experiences an accident, be that a light bump in the fender, to a major crash involving multiple vehicles and passengers. It would be possible to call the driver to confirm that everything is okay, to contact emergency services, and gather information and trouble codes from the vehicle to start pre-filling out insurance forms, saving time and resources in the process. As we noted earlier, insurance providers can, on average, save $800 (£612) on a claim if the FNOL (First Notice of Loss) is received within the first 30 minutes of an incident. With an automatised system like the one described, this money could easily be saved on every single claim.

We recently updated the HIGH MOBILITY car data platform with new functionality. We’ve just added support for new events in our car emulators and in Production Mode to enable these very scenarios. These new events — Accident Call and Emergency Call — send a push notification to an application whenever a car detects a significant impact or if its airbags are deployed. The Accident Call detects and notifies of minor impacts while the Emergency Call detects and notifies of major impacts.

In addition to the Accident and Emergency Call webhook, you will also be able to access a variety of different data points once the accident/emergency call has happened, for example sensors or location. This additional information further informs and supports the claim, streamlining the process and saving the customer from filling out endless forms. Gathering information from data points — rather than just the driver — means that you immediately have a good understanding of the nature and seriousness of the accident and the damage which has occurred to the vehicle.

“The use of telematics allows an insurer to gather a wide spectrum of relevant information that, from the time an accident occurs, allows them to start piecing together an accurate image of what, exactly, took place.” — IMS, Insurance & Mobility Solutions

Benefits for the car insurance provider:

• he has accurate information about the accident directly from the vehicle which means that fraud and human error — and their very large accompanying costs — are significantly reduced.
• the claim can be processed much more quickly after an accident, saving both insurer and customer huge sums.
• he does not need to employ an adjuster to verify the claim, he can instead gather data from multiple data points, eg sensors or location, to further inform and support the claim.
• he does not need to employ so many customer service operators to assist the filing of each claim — the user can do it all via an app.
• he retains more of his users because they have had a pleasant and easy experience of filing a claim so the costs associated with customer retention are reduced.
• he can gain a better understanding of the risks he underwrites because of the wealth of data that is processed automatically after every accident, and be fully informed when pricing those risks.
• he can offer new and innovative services directly to policyholders based on the pool of data gathered about their needs and experiences with both the company and their history of accidents.
• he no longer needs to track down people who did nor file claims; all accidents — both major and minor — are automatically reported.

Benefits to the user:

• he does not have to manually file or prove a claim — all data is collected by the vehicle automatically when an accident occurs and sent via the app.
• due to the speed with which data can be transferred from vehicle to car insurer, the driver’s claim does not increase because of delays in reporting.
• he has a pleasant experience filing the claim — it is a quick and streamlined process via an app — which, as we have seen, hugely increases his loyalty to the insurer.
• in the long term, savings made by the insurer (thanks to fraud prevention, reduced employment costs and reduced customer retention costs) can be passed on to the customer.
• he has peace of mind because he knows that if an accident were to occur, he has immediate assistance.

What have we learned so far

As we have seen, switching claim filing processes from a manual process to an automatised process offers a host of advantages to both the insurer and the user, from more accurate claims handling to increased customer satisfaction.

But when we are looking at the bottom line alone, what is the overall saving a car insurer can make from adopting an automatised approach?

According to this McKinsey&Company report claims expenses incurred by a car insurance company can be reduced by as much as 25–30% when end-to-end digitisation of the customer claims journey is achieved.

With such a huge overall saving in the offing, automatisation through digitisation — using car data to alert, inform and verify, and an application to process claims — seems to be the obvious solution for car insurance providers seeking to save money, retain customers and increase efficiency.

Want to learn more about building connected car applications? Head over to high-mobility.com or post a question in our forum or in the dedicated Slack group.