Automating auto claims: Connected cars offer new options

There’s a difference between haste and speed. One leads to wasteful mistakes. The other can set a new benchmark for performance and elevate the customer experience. In auto insurance claims, the right data at the right time can lead insurers past the pitfalls of haste to the rewards of speed. The difference is precision, and there’s no faster channel for delivering precise, powerful claims data than telematics.

With traditional claims models, it can be hard for insurers to muster anything approaching haste, much less speed. The process is passive at the outset. It depends first on the policyholder — amid the stress that follows an auto accident—to contact the insurer and initiate a claim. This is the first of many steps that include vehicle inspection, damage estimation, repair and often haggling over liability allocation — a messy, unpredictable progression that can add incrementally to the customer’s stress and the insurer’s expenses.

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Giving insureds options

Claims don’t have to unfold this way. With the customer’s consent, there are better alternatives, enabled by the ever-growing capabilities of wireless technology, connected vehicles, and the vast data-gathering capabilities that original equipment manufacturers (OEMs) are building into most modern cars. Here’s one scenario that could play out in the not-so-distant future:

Two cars collide, and upon impact, one vehicle’s onboard sensors and computers begin gathering critical information, reaching back to the seconds before the crash and blending those data points into a digital narrative of the event. Throttle and braking inputs; changes in the car’s direction, orientation and speed; points of impact; deployment of airbags — all this and more begins to guide the response.

The priority is the well-being of the people in the car. Depending on the severity of the impact, the vehicle’s built-in sensors activate an automated response system to prompt the OEM’s call center to notify first responders based on the GPS-determined coordinates of the crash. The vehicle engages the call center to assist the driver with any medical or accident needs, such as ambulance, police and towing services. If the driver is safe and uninjured and the car matches a participating insurer, the OEM’s call center offers an immediate “warm transfer” to the car’s insurer for the driver to initiate the claim.

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In the background, much more is in motion. The insurer mobilizes its partners as soon as it learns of a loss. GPS data guides the dispatch of the insurer’s local towing partner to recover the car and bring it to a preferred repair facility. If the customer needs temporary transportation, another partner of the insurer who may be a local rental car agency or car-sharing service like Lyft or Uber, is sent to the accident scene to help the driver get back on the road promptly. Sensor data projects the nature and extent of the damage, providing insights for damage and injury triage, assigning the appropriate adjuster, and determining whether the car is likely to be repairable. If it is, parts ordering begins within minutes. If a total loss appears likely, the car is towed directly to a storage or salvage yard.

Sensors also record the location of the car’s occupants, which seatbelts were fastened, which airbags deployed or nearly deployed, and what forces may have affected the driver and passengers. All of this, joined with models and historical claims data, gives the insurer a head start on injury triage, estimating appropriate injury payouts, and reserving accurately for the incoming claim.

Sensor readings stored in the car’s electronic data recorder (EDR), or “black box,” with or without customer data, are joined with photos, video, and weather and traffic data to begin reconstructing the accident and guiding the apportionment of liability.

However, it is not all about the connected car data alone. When that is joined to existing resources — coverage information, claims history, and more — the telematics data becomes still more useful, and the result is a fuller, clearer picture of the event and the parties involved, potentially in minutes instead of days or weeks. Not only is the claim settled faster if it is legitimate, but patterns that suggest potential fraud can be spotted early, steering the claim to the insurer’s special investigations unit if warranted.

The EDR data can even have a life beyond the claims process. Historical EDR accident data can support claim performance analytics to understand how sensor data correlates with claims handling, payouts, and damage from various types of crashes. One insurer’s claim payouts can be benchmarked against aggregated insurer data for similar damage.

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The value continuum

Two important things happen at every step in this scenario:

• The customer is cared for in a way that reduces stress and friction with the insurer and builds goodwill. The pile of details that typically demand attention after an accident is reduced to a more manageable size. The car is repaired or replaced more quickly. The claim may settle two to three days sooner, on a more solid factual foundation that supports fairness and impartiality.
• The insurer mitigates the steady drip of lost time, rising loss adjustment expenses, and escalating loss costs that can plague the traditional claims process: multiple tows, needless in-person inspections, overpaying on repairs and rentals from non-preferred providers, protracted subrogation and more. The savings could add up to $600 and beyond per claim, not including adjuster costs or the harder-to-measure effects of customer defections that may result from a poor claims experience.

Reaching this state doesn’t happen simply. It depends on multiple data pipelines delivering the right information where and when it can do the most good. That is primarily the realm of vehicle telematics, delivering second-by-second data on a car’s speed, position, mechanical functions and driver inputs.

Most new cars — soon to be nearly all — are connected, with the capacity to send continuous, wireless telematics data. Those that are not connected can still deliver much of that information via a tethered or plug-in device for wireless transmission. Mobile technology also makes it possible to capture driving data through a smartphone without plugging anything into the car’s onboard systems.

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A potent digital mix

Telematics data alone is powerful across a range of insurance applications, from lead generation to underwriting to customer engagement. When combined with external sources of data, the power is multiplied to help refine and accelerate the claims process. The challenge is to capture these streams of data, flowing in multiple formats, and knit them into a cohesive, automated, low- or no-touch system for handling claims from first notice of loss (FNOL) to final settlement. Streamlined data collection and analysis are the catalysts that transform the staid world of the claims department, enabling touchless claims in which checks are cut in record time.

Better still, old models can give way to entirely new ones. FNOL can become INOL—instant notice of loss. Labor-intensive, time-consuming and costly gathering of police reports, damage inspections, and a majority of claimant testimony can be replaced with analytics that model damage and virtually reconstruct accidents from data generated at the moment of a crash.

These capabilities may appear to place intimidating demands on an insurer’s information technology staff and infrastructure. Beyond the self-evident challenges of making the above scenario a reality, none of this can happen unless customers opt in to share telematics data from their cars. Obtaining and maintaining those permissions adds yet another layer to the logistics.

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As resource-rich market leaders move in this direction, their competitors must consider whether and how they can match the pace of change. It may require one or more partners that have the resources and know-how to supply, normalize and translate the diverse data streams needed to support the new claims paradigm.

A fully automated claims process isn’t for every insurer, but it doesn’t have to be an all-or-nothing proposition. Telematics-based services can be layered to allow each insurer to choose the level of service it provides or to take a stepped approach toward increasingly sophisticated models that deliver top-notch customer care.

All along the way, collaboration is critical — with data exchange partners, automakers, telematics service providers and the on-the-ground vendors that interact with customers alongside the claims adjuster. At the heart of these partnerships will be timely and reliable multisource data.

Dawn Mortimer (Dawn.mortimer@verisk.com) is assistant vice president, personal auto product development, IoT/Telematics at Verisk (Nasdaq:VRSK).