What underwriters need to know about new vehicle technology

Automotive technology is rapidly evolving. Consumer purchasing decisions are increasingly based on features that enhance safety and increase the personalization of the driving experience. These evolving consumer demands motivate manufacturers to integrate the newest technology as quickly as possible.

While these new features create a more enjoyable experience for the driver, they also are creating a new level of complexity to the auto insurance underwriting process.

For example, an increase in electronic systems makes it more difficult to calculate repair costs and the actual value of a vehicle. At the same time, these systems provide an overwhelming number of safety and driving behavior data points to consider at the point of quote. How are underwriters supposed to keep up/?

Here we’ll discuss three of the biggest trends impacting underwriters and share how the same technologies can also be leveraged by the insurance industry to make more informed decisions.

Connected cars provide greater real-time insight.

About half of new vehicles sold globally are connected, but by 2030 that number will jump to 95%, according to McKinsey & Company. In the U.S., that number is already at 90%.

Through vehicle connectivity, or telematics, data can be used in a myriad of ways — from assessing acceleration, braking patterns, location and route history to enabling vehicle-to-vehicle and vehicle-to-infrastructure communication. With this extra layer of data, underwriters have the ability to offer alternative pricing models such as pay-as-you-drive policies and discounts for safer driving.

Insurance policies based on telematics data have gotten a fair share of attention recently due to COVID-19 and stay-at-home orders. Consumers began questioning why they were paying the same for car insurance when they were driving substantially less. Even after the pandemic is in our rearview mirror, interest in telematics policies is expected to skyrocket. According to Berg Insights, the total number of telematics policies in North America alone is forecasted to increase from an estimated 14.7 million policies at the end of 2019 to 53.6 million by 2024.

What does this all mean for underwriters? Data produced by connected cars provides the ability to attract and retain the highest performing segments of a business and more accurately reflect the price to risk relationship.

Advanced Driver-Assisted Systems improve safety

Consumer interest in Advanced Driver-Assisted Systems (ADAS) features — including adaptive cruise control, automatic parking, automatic emergency braking (AEB) systems and blind spot detection — is growing. Car manufacturers have even started adding features to new models. For example, 20 automakers that combined make up virtually all of U.S. light-vehicle sales, have voluntarily committed to making front crash prevention technology standard by 2022.

With such a broad range of ADAS technologies offered by each OEM, the overall impact on accidents varies. However, for underwriters to accurately assess risk, both from predicting crash severity to anticipating the cost and complexity of repairs, it becomes essential to understand this industry shift. For example, when it comes to cost, a basic bumper repair can set a policyholder back $1,500 to $4,000 when the cost of sensor and camera replacement and recalibration is added in, according to Consumer Reports. And as more cars on the road include ADAS, many with a combination of standard and installed add-on features, insurance carriers will need to start factoring in these technologies when calculating rates.

Artificial intelligence and digital technology help make better decisions.

Through digital solutions, underwriters can increase the efficiency of existing processes to help reduce risk, improve performance and elevate the customer experience. Innovation improves access and analysis of vehicle data to revolutionize the way pricing decisions are made. And by embracing AI, underwriters can gain valuable insights by using photo analytics to uncover potential pre-existing damage.

Virtual vehicle inspection provides another example of an AI-enabled technology that is making a difference in the industry today. Through mobile devices, drivers can easily capture photos and submit information directly to their carriers as they assess vehicle conditions and make policy determinations. While virtual services became a necessity during the pandemic, the time and money-saving benefits for both the driver and insurance company mean this technology is here to stay.

An eye to the future

As the industry moves toward electric and autonomous vehicles, the car of the future will no doubt include more features and more complex electronic systems. Underwriters need to be prepared to work with even more data than they are faced with today. This will ultimately lead to decisions being made faster and more accurately, which is a win for both the policyholder and insurance companies.

Jason Verlen (jverlen@cccis.com) is senior vice president of product management for CCC Information Services Inc. He has extensive experience in the software industry with specific expertise in product management, big data and analytics. Before joining CCC in May 2015, Jason spent five years at IBM, where he was vice president of Big Data Analytics.

Keep reading: How vehicle telematics predict the future for home insurance