In this blog, we explore three reasons why the industry should consider re-engineering motor insurance and how a more dynamic, proactive approach could help to reduce claims costs and improve loss ratios.
The latest figures from the Department for Transport show that there were 1,793 reported road deaths and 24,831 serious injuries in road traffic accidents in 2017. Despite campaigns from various road safety charities such as Brake and RoSPA, there was no reduction in the numbers from the previous year. So maybe it’s time for a different approach, we ask the question, why do we accept that motor claims have to happen?
As an industry we have been focused on increasing the efficiency of motor insurance claims in order to reduce costs, but what would you say if I told you that there are insights that exist and have the potential to:
- Reduce the risk of motor collisions occurring .
- Speed up claims when they do happen
- More importantly, help to reduce the number of lives lost on UK roads each year.
Combining data from black box tracking devices and video with Artificial Intelligence and Machine Learning means that we can spot patterns in risky driving behaviour that, if left uncoached, could contribute to collisions. By leveraging this data, the motor insurance market can take a more proactive approach and could play an integral role in reducing the risk of a collision occurring and the resulting expense of a motor insurance claim.
In a world where the availability of data is growing exponentially, we’re all familiar with using tracking devices to help reduce the cost of motor insurance. This is especially common for new drivers who have traditionally been regarded as a high risk by the insurance industry based on a limited number of rating factors. But what if the insurance industry could change the motor insurance model completely, to the benefit of everyone.
1. Risk Reduction – Proactive Collision Prevention
Insurers understand that if a driver demonstrates behaviours such as excessive mileage, driving at night or speeding, their likelihood of being involved in a collision increases. If insurers can identify potentially risky behaviours via tracking devices and data analytics to intervene early on, they could potentially change the behaviour of the driver and prevent a collision from ever taking place.
Intervention doesn’t have to be laborious for the insurer either; it could be a simple automated text message to the policyholder to notify them that a risky behaviour has been observed, with a gentle reminder to stay safe whilst out on the road.
If the risky behaviour is repeated within a short timeframe (to be determined by the insurer), then the insurer might want to add a personal touch to the intervention. Maybe a quick call to the policyholder to see if there’s anything they can do to help influence the driver’s behaviour. If the insurer feels that further training would be beneficial for the policyholder, they might consider incentives, online training or something more hands on. The insurer may decide that investing funds in developing the driver would be more cost effective than the potential cost of a claim, if the behaviour remains unchanged.
Insurers could, therefore, radically reduce the frequency of claims by focusing resources on pre-claim activities and using data and technology to proactively manage risky behaviour. This could save on claims costs for all parties, improve loss ratios for the insurer and potentially reduce the number of deaths on UK roads.
This is a great opportunity for the insurer to manage risk collaboratively with the policyholder, improving proactive customer service and building a stronger, longer-lasting relationship.
2. In the Event of a Collision – First Notification of Loss (FNOL)
Unfortunately, we’ll never be able to prevent every single collision from ever taking place. Some claims will happen - there’s always going to be someone who has a bad day or makes a bad decision behind the wheel.
In this scenario, the insurer needs to know about the collision as soon as possible to be able to take control of the claim and the claims process. In order to keep costs under control, speed is the key in obtaining the right information and evidence.
In an increasingly digital world, we’re not too far away from most vehicles on the road being able to trigger an alert direct from the vehicle to the insurer when a collision occurs. For those vehicles with this functionality, the alert can help both the claims management companies and insurers take control of the claims process within minutes.
An alert could automatically trigger two distinct workflows:
i. The creation of documentation to help with the claims process and collection of data from the scene.
ii. A task to an agent to call the policyholder and take control of the situation:
- They can check: is the policyholder physically ok?
- Contact emergency services with complete location information on behalf of the policyholder, if necessary.
- Speak to the policyholder and potential witnesses to gather the necessary information to begin to process the claim.
- Organise recovery, onward travel, medical assessments and repairs using their preferred suppliers.
This level of efficiency helps to deliver great customer service, keep control of claims costs, retain business and help to secure competitive renewals. From an insurer’s perspective, this means more effective management of risk and pre-claims which in turn, can reduce loss ratios and help insurers to grow their book profitably. But there's still many vehicles on the road without this capability.
According to Fleet News, well established companies such as FMG and AXA have published figures illustrating how quickly costs can escalate after a collision, highlighting the importance of FNOL in taking control of the claim. Accident management specialist, FMG estimates that overall incident costs can escalate from £1,000 to £10,650 if the necessary third-party information isn’t captured; that’s a hefty increase of 965%. AXA Insurance has also witnessed £5,000 claims turn into £50,000. And household name, Allianz urge policyholders to act promptly as they witness claims increasing from £5,000 if reported within 24 hours to £20,000 if reported on day 30.
3. Reducing the Number of Lives Lost on UK Roads
By far the most important reason why we need to consider reengineering traditional motor insurance models is the very real opportunity the industry has to reduce the number of lives lost on UK roads each year. A reduction, no matter how big or small, in the number of people who lose their lives or are seriously injured on UK roads is a positive step in the right direction. Insurers can play a much bigger role in their customers driver safety and data is the key to unlocking this vital change.
Insurers don’t have to figure this new model out alone. Concirrus’ software, Quest Motor has been designed to aggregate data from multiple sources to provide insurers with a more complete view of risk. It enables the insurer to tailor premiums to the behaviour of the individual policyholder, rewarding and encouraging safe driving behaviour throughout the life of the policy.
By flipping the motor insurance model on its head and taking a more proactive approach to changing risky behaviour, you could be saving more than just your time and money – ultimately, you could be saving a life.