If you work in (or adjacent to) the insurance industry, you've probably already heard of insurtech. And if you haven't, it's more than likely your car insurance has already been impacted by it. Insurtech is changing the face of the auto insurance industry as vehicles and software become smarter and more advanced technology emerges -- and in a few years, the auto insurance industry may be almost unrecognizable compared to where it is now.
Insurtech: What It Is
First, let's define what insurtech actually is. Broadly speaking, insurtech is the implementation of technological innovations designed to increase efficiency and accuracy in the car insurance industry. This may take the form of technology like AI, data analysis, the Internet of Things (IoT), and more. This technology allows insurance companies to more efficiently create policies, process contracts, evaluate insurance risks, and process claims. While insurtech is still evolving and faces some obstacles when it comes to regulations and reluctant insurers, the technology isn't going anywhere anytime soon.
The benefits of insurtech aren't just limited to corporate efficiency, however. The technology allows for innovations like the creation of highly customized policies and more accurate data analysis to make sure policyholders aren't paying more than they should for certain policy features. With the assistance of AI, insurers can be more engaged in choosing their coverage, get more accurate information about their needs, and take advantage of online, self-serve solutions that don't require the presence of a human agent.
How Insurtech Is Used in the Auto Insurance Industry
Now let's look at some more granular examples of how insurtech is changing things.
Many drivers now have telematics devices installed on their cars, which can not only send real-time tracking data to insurers about driving speed, braking, and other driving behavior, but can also be useful in mileage-based car insurance, offering precise numbers on just how much a person has driven within a given period.
Insurtech can also provide more accurate predictive analysis of a customer's risk levels, based on collected data. This, perhaps more than any other innovation, is poised to change how car insurance policies work. Currently, many insurers factor in things like gender, marital status, credit scores, and age when assessing a policy. As a matter of fact, The Zebra's Ross Martin reveals that your car insurance bill could go up by $1,600 if you have a poor credit score, regardless of your actual driving record! Insurtech changes the game by accurately assessing how a person drives according to actual data instead of trends and demographics that may have nothing to do with a driver's actual behavior on the road.
Furthermore, cars equipped with AI safety features such as lane-keep assist, automated emergency braking, forward collision warning, and driver drowsiness detection can lower premiums by lowering some of the risks that come as an inevitable part of driving.
Insurtech is also becoming a major part of fraud detection and prevention technology, finding red flags and fraudulent claims more accurately than most human agents would be able to. And should there be a claim, assessment is now far more accurate due to mobile app features allowing customers to upload photo and video of vehicle damage, or forward dashcam footage to the insurer.
Among the many advantages of insurtech is the ability to improve efficiency and accuracy without adding a lot of extra overhead. While AI and data centers aren't free, they don't require an entire staff and physical offices to work, and may even eliminate the need for such facilities. Chatbots and automation can reduce the demand for human agents, and the lower operating costs could lead to cheap car insurance for customers.
The Future of Insurtech
These changes will be heavily reflected in the adoption of self-driving vehicles, which are growing more prevalent and popular. Autonomous vehicles will drastically reduce the number of claims (as human error will be compensated for), and shift liability for accidents from the driver to the vehicle -- which could avoid a costly surge in premiums for drivers of AVs who happen to get in an accident. Going beyond the innovations already mentioned, autonomous vehicles could eventually eliminate all your driving behavior and even your claims history from the record as far as car insurance is concerned -- since technically, you may no longer be driving your vehicle at all.
The human element isn't likely to become a thing of the past anytime soon, however. Plenty of customers still prefer phone or face-to-face interactions with their insurance agents, particularly if they've known them for years. Others will prefer to do all the work themselves with minimal involvement of other human beings. Insurtech is not a replacement for the existing way of doing things (not yet, anyway), but offers additional method of achieving the same ends.
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