How AI Can Turn Insurance On Its Head by Helping Customers to Proactively Manage Their Risk
In recent years and particularly during the Covid-19 pandemic, we have started to see a rise in businesses using artificial intelligence (AI) to improve their service or products and ensure a seamless, transparent customer experience.

By Nick Pester, General Counsel, Zego

One industry where we are seeing this make a big impact is the motor insurance sector. Despite still being perceived as one of the most outdated industries, the adoption of AI is certainly altering the way in which motor insurance companies operate, from pricing through to handling claims and even enabling customers to view and manage their driving behaviour with their very own ‘driver profile’.
Whilst some of these changes are in a nascent stage, nearly 85% of insurers believe AI will either ‘significantly change or completely transform’ the industry within just a few years. Below, I explore three ways in which AI is already turning insurance on its head.


Fairer and more affordable pricing

Traditionally motor insurance pricing models are based purely on the age and gender of the driver amongst other factors, such as location and even occupation. For example, a younger driver could be faced with high insurance costs simply because of their age when in fact they are a safe driver and take less risks on the road than their next door neighbour, 20 years older than them. This driver will receive a fixed annual policy, usually incurring an upfront cost before they even begin paying their insurance. Once it has been implemented, they tend to see or have access to very little data or information – the insurance sits behind the scenes and isn’t really thought about again until renewal.

With the adoption of AI, insurers are able to harness real-time telematics data from vehicles, evidencing individual driver behaviour, and use this alongside more traditional factors to price policies more accurately and fairly.


Drivers can proactively manage their risk

The use of AI allows companies to be far more interactive and transparent with their customers on how policies are priced and gives them control over what they can do to lower their costs. Insurers can even go that one step further and produce valuable insights from this data that can be fed back to customers in a completely transparent model.


Customers can view a ‘risk score’ via their driver profile, which shows performance over a certain trip, including speed, routes taken and other additional risks. This also gives actionable steps to modify driving to reduce risk and ultimately insurance costs.

Drivers can also choose to have this information texted to them, meaning they are able to make real-time decisions on their driving behaviour. As part of this, insurance companies can offer rewards and benefits to incentivise good driving, allowing customers to save money and only pay for insurance that truly reflects the way they drive.


Quicker claims processes

Beyond pricing, insurers can use telematics data to speed up and more effectively manage the claims process with the customer.


For example, some of the ClaimsTech platforms on the market allow a summary of the collision to be sent to the driver in a matter of seconds and ensure that the recovery process is far quicker than with the more traditional insurers, which often involves multiple parties in the chain and a number of physical inspections. With AI helping to manage this process, drivers could expect any funds they are owed paid into their bank in a week, if not less, as opposed to months.

All of that said, it remains important to ensure that customers still have access to human operators when they need it. There may still always be a time when all that’s required is a friendly face and a kind word!


What comes next

The future of AI in the insurance industry is bright and has the potential to unlock more innovative ways of pricing, managing claims and monitoring driver behaviour. Going forward, AI is likely to transform insurance from primarily an indemnity offering into an ancillary product, supporting a more proactive risk management platform, shaped and driven by the end customer.


Insurance will no longer be about what the sector thinks customers want, but what the customer actually wants – a fairer, more tailored experience that better reflects their actual risk profile and preferences. It’s time for insurers to realise that the real power of AI lies not so much in improving processes, but in empowering their customers.

Share this article:

Share on linkedin
Share on twitter
Share on facebook
Processing...
Thank you! Your subscription has been confirmed. You'll hear from us soon.
Join 160,000+ community members who receive weekly insights
ErrorHere