Auto Insurance

3 Ways New Technology Is Affecting Insurance Customers

3 Ways New Technology Is Affecting Insurance Customers

The insurance industry is starting to embrace artificial intelligence and new technology. See why it's good news for you.
insurance adjuster taking picture of car damage
insurance adjuster taking picture of car damage Source: Getty Images

While we haven't yet reached the level of Skynet, the fictitious superintelligence of the Terminator films, artificial intelligence (AI) and the internet of things is rapidly reaching sophistication. Scientists and companies have trained computers to do everything from win in world-champion-level chess competitions to operate Waymo's fleet of self-driving cars, even as critics raise concerns over the implications for privacy and employment.

Now the insurance industry is embracing new tech to ease the burden of processing claims and even to learn what kind of driver you are. And if you're wary of giving away personal driving data, they might change your mind—by dangling a discount. Here are three areas in which companies are using AI and other technology to improve the insurance process.

Policy underwriting

Companies like insurance start-up Lemonade use chatbots, AI and algorithms to process your particular location and other data to generate a home or renters insurance policy tailored to your needs. The "insurtech" company's website claims that your policy will be underwritten in just 90 seconds, and for lower premiums than major competitors. (Because Lemonade isn’t yet available nationally, we haven’t assessed its rates and service.) When you apply for a policy, you'll text or speak to Maya, the company's AI engine, and she'll ask you the necessary questions to help you choose your coverage.

Data analytics

The insurance industry depends on broad, healthy pools of data. Big data tells insurers about the risks of insuring cars in a given city, or the potential costs of tropical storms over the coming year. Further, comprehensive data about an individual driver can indicate whether that driver should receive a discount (or a rate increase) based on his or her driving habits.

Progressive is one auto insurance company that’s using new tech to gather and analyze data on individual drivers. When you sign up for their Snapshot program, you'll get an automatic discount of $25, and another discount (based on your driving) when you complete the program approximately six months later.

During that time, you’ll either run a phone app or receive a plug-in vehicle device that allows Progressive to analyze when and how far you drive, as well as potentially troubling trends, such as frequent hard braking. If you choose to use the plug-in device, it will even beep when you apply the brakes too quickly, providing feedback on how well you're doing. The fewer the beeps, the greater your discount will be. Participating drivers see an average discount of $130 a year, according to Progressive. However, the program is risky for those who are less than stellar behind the wheel; two out of 10 customers actually suffered a rate increase due to their poor driving.

Easier claims processing

Many major insurance companies, such as Allstate and Esurance, now offer mobile apps that allow you to quickly submit claims at the scene of an accident. Allstate's Quickfoto Claim program allows you to use the Allstate app to document the damage to your vehicle and file a claim in minutes. And you don't even need to be an Allstate customer to use it.

And last month, Lemonade claims to have broken a world record when a man submitted a theft claim and had his reimbursement issued within three seconds—a process that typically requires weeks. This claim might be an exceptional situation, and one can imagine scenarios where such automation might be inappropriate, due to the complexity or unique nature of a claim. However, the case illustrates how insurance companies and many consumers may stand to gain from automated insurance technology.

It remains to be seen, of course, how widely these and other innovations may spread in 2018, and how warmly consumers may embrace them. Can new tech make a notoriously opaque industry at least a little bit easier for its customers to engage? We’ll follow that question with periodic updates throughout the year.