Now, consider the traditional AM approach. First, policyholders initiate the claim directly from the scene, answering questions including what vehicle was involved and where and when the accident occurred. At the same time, an agent confirms coverage and initiates vehicle capture through the AM provider. The process typically takes minutes, all while the driver is waiting at the scene.

While AM, overall, can reduce loss cost, it is difficult to scale. Internal surveys show only 8-9% of FNOL occurs at the accident scene. These findings point to significant room for growth in AM penetration as a fraction of non-drivable accidents, and two potential paths to increase usage of AM: changing policyholder behavior or leveraging automation to trigger the FNOL process.

Cut to the chase

Automated, on-scene contact is the linchpin enabling AM at scale to offset claims cost while also delivering a higher-quality customer experience.

Changing behavior, typically through incentives or disincentives, is difficult to achieve and has a long lead time. Our research shows insurers offering roadside assistance see a more than six times increase in tow volume from the accident scene. As policyholders become conditioned to contact their carrier for roadside incidents, they become more likely to call when they have an accident. However, this level of familiarity takes time to build.

A better approach is automating the process using technology that can accurately detect an accident has occurred and contact the insurer directly, eliminating dependence on the policyholder. Automating FNOL/AM has powerful benefits, including safety (accident detection and automatically contacting emergency services), convenience (limiting policyholder phone time and improving claim experience), and capturing more vehicles at the accident scene (greater impact on loss cost across the book and reduced claims cycle).

This reduced time can significantly impact customer satisfaction. According to J.D. Power, policyholders whose vehicles were fixed and returned within 14 days have an average satisfaction of 843 on a 1,000-point scale. This figure dropped by 71 points when customers waited longer than two weeks for repairs. Further, automation enables greater AM volume, which translates to greater lost cost savings. Our AM data shows average savings of $500-$800 in storage and associated claim costs per event.

Automation strategy

There are three possible automation approaches. The first is through embedded telematics, whereby a car's sensors provide diagnostic data including accident recognition. However, embedded telematics is still in its infancy, representing just 3.5% of light vehicles in operation in the U.S. today, with projected growth to just 7.4% by 2021, according to combined studies from Statistica, IHS Markit and Capgemini. Its ability to significantly impact fleet-wide AM is far in the future.

A second option involves On-Board Diagnostics (OBD-II) devices, which capture information including location, speed and braking patterns, and use vehicle sensors to detect airbag deployment (indicating a crash). At a cost of $10 to $20 per device, insurers face approximately $3 billion or more in hardware costs to cover the approximately 203 million auto policyholders in the U.S. today, not including ongoing telecom costs and potential subscription fees.

A better approach is leveraging a device more than 75% of Americans already carry in their pocket: a smartphone. Smartphones contain sensors including GPS and accelerometers that can capture key telematics data about an accident. When this data is harnessed by a powerful algorithm and platform, it can accurately and reliably detect accidents.

In the case of an accident

Mobile telematics technology can detect the crash, trigger communication paths with the driver and connect with emergency services, if needed. At the same time, these platforms can contact insurers to initiate FNOL.

This type of technology represents significantly greater and more near term opportunity for penetration than connected vehicles, and is easier to deploy than OBD-II devices. Mobile apps are also highly scalable and represent the most cost-efficient mechanism for automating on-scene FNOL for better AM. Further, mobile telematics can enhance what is often a policyholder's first interaction with their insurer, providing critical emergency response in a customer's time of need, delivering increased peace of mind to drivers and improving customer retention.

Business considerations

Finding the right AM partner is crucial; consider not only technical sophistication but also a partner's ability to understand, integrate and scale to match claims requirements. The right AM partner should offer a comprehensive, holistic platform approach to manage the complexities of an accident scene. The AM provider effectively becomes the policyholder's initial touchpoint, making this a question of partnership, not outsourcing.

Facing compressed margins, insurers are seeking ways to reduce claims cost and improve the customer experience. Current mitigation approaches including increasing premiums will likely result in further loses for insurers, and an additional strategy must be considered. Capturing FNOL on-scene delivers on this opportunity by allowing insurers to tow the vehicle directly from the accident scene to a repair shop, expediting the repair process and eliminating the expense of storage and secondary tows. However, on-scene FNOL is increasingly rare across the industry  and incentivization programs are unlikely to move the needle significantly. Rather, automation through mobile telematics offers both the high penetration and low cost needed to drive impact in ways other tools cannot while unlocking a potential $3 billion cost-savings opportunity.

Jeffrey Blecher is chief strategy officer for Agero, where he leads ongoing development of long-range strategic plans and objectives.

As vice president of Product Strategy & Marketing at Agero, Luis Quiroga is responsible for shaping the company's growth roadmap and product marketing.

Message [email protected] to reach the authors. These opinions are their own. 

See also: Top insurance technology issues nagging at industry leaders