Personalizing the Auto Insurance Industry with the Help of AI

Every day digital advancements change the way we look at and interact with the world. New ways of sharing information and collating data have made things in some ways simpler, even in complex areas such as auto insurance.

Advancements in AI (Artificial Intelligence) are the most likely to bring a great chance to auto insurance. Currently, we are looking at an insurance market that has changed very little over the years. The real question is, how much longer can stagnation last?

AI still has a long way to go before it is on par with the beings portrayed in science fiction novels. Still, there are plenty of ways for modern AI to help the insurance world. AI processes can help with pricing, handling claims, and fraud detection, just to name a few options.

The advantage of using AI to set prices comes with the ability to create individualized and personalized policies. An insurance company that employs this tactic will provide custom quotes curtailed to the clients’ needs, creating a competitive advantage. 

Artificial intelligence could easily customize these policies based on user location, marital status, family status, the likelihood of premium charges, driving history, and more. Most notably, it could also make sure of IoT (Internet of Things) to draw in more personalized data.

Given the potential power of AI, the level of personalization is limitless. The policy could go beyond personal records and look into the car the coverage is intended for. Here crash and injury data could quickly come into play, as well as automotive history.

As for handling claims? It wouldn’t take much effort to automate the handling of certain claims through the use of artificial intelligence. This would save time and money in the long run and give clients a faster customer service experience.

In turn, this would shorten the time required for settling claims. This will result in happier customers, but it will help limit fraud cases in the process. This is a vital element, as insurance fraud is currently costing companies around $40 billion per year. AI can easily detect fraudulent cases, diminish risks, and streamline the process for legitimate cases.

 

Self-Driving Cars and Auto Insurance

amigo_mga_self_driving_cars_and_auto_insuranceAuto insurance agencies know a lot about traffic, how it works, what causes it, and how to best ensure drivers based on factors like age, college GPA, income, and color of the vehicle. Traffic engineers know well that no matter what they do to direct and control traffic, human error is hard to account for. For example, we have the classic dilemma of when to merge in the event of a road closure or construction. Do you merge over as soon as you see that the road is closing soon, or do you wait until your lane is cut off to merge?

In his landmark work on traffic engineering entitled, Traffic: Why We Drive the Way We Do (and What It Says About Us), Tom Vanderbilt helps readers understand the nuances of what makes drivers behave the way they do and how city planners, construction crews, navigation apps, and drivers themselves try to account for this in their day-to-day lives. From an unexpected demonstration to someone distracted by a song on the radio, it’s hard to account for human error when making plans that have to do with transportation.

What if we take the human driver out of the equation, though? For the most part, auto insurance covers the damage drivers cause to their own cars and to the people, vehicles, or other property involved in the accident. It’s been demonstrated that self-driving cars are not immune from getting into accidents and causing havoc. In 2016, a self-driving Tesla car was involved in a fatal accident in Florida. Who, then, bears the responsibility?

Warren Buffett, who owns Berkshire Hathaway, which recently acquired Geico insurance, believes that the onus of protection will shift from drivers to those who manufacture and program the self-driving cars. Already the state of Michigan has passed laws that require the automakers to assume responsibility for any accident that occurred because of a self-driving car.

Since it’s common knowledge that most of the traffic issues that plague our day to day lives are the results of human error, many believe that automation will reduce the instance of accidents. However, if automakers are required to bear the responsibility for insuring these autonomous vehicles, they may experience a disincentive to produce them, since the costs would swell as the technology’s bugs get worked out. Thus, the speed of technology development would plateau and human-caused traffic accidents would continue to occur.

There are a lot more questions than answers right now regarding what will happen as cars are no longer controlled by fallible people. Insurance companies, automakers, and legislators will continue to debate where the burden belongs, but in the meantime, auto insurance will continue to cover must human error.