Insurance & Innovation

Car and home insurance is not the most exciting industry. It’s not exactly synonymous with innovation or technology. What people don’t realize is that insurance is a lot more “hip” than people think. Insurers are starting to use Social Media, digital advances, and Big Data to improve their top and bottom line. These trends have and will continue to benefit the insurance industry.

 

Fraud and Social Media

Fraud costs the non-health insurance industry about $40B per year. When talking about insurance fraud I’m specifically referring to instances where someone makes a false claim to receive a benefit. Insurance companies have started using social media as a way to detect or prove fraud. As one might suspect, it simply doesn’t make sense to use social media to investigate all claims. There are just too many claims for various amounts of money, it is not efficient to scour Facebook pages unless something is suspicious or a claim is large. Insurers tend to use logic to determine whether or not a claim warrants what I like to call “social media stalking”. This could include a claimed injury but no seeking of medical attention or the appearance of staged accidents. For example, people claiming to be involved in an accident on vacation but having with no luggage with them.

There are some great examples of social media fails where posts or videos directly prove that an insurance claim is fraudulent. It makes you wonder whether or not people didn’t care about getting caught, didn’t think insurers used social media, or completely forgot that their life was online for all to see.

untitledMy personal favorite example is of a guy who claimed severe neck and back pain from a car accident. He tweeted a picture of himself coming in 7th in a 10K race. Then he tweeted he signed up for a half marathon. After that he posted a picture of him finishing the race. The insurer was suspicious when he hadn’t sought out medical treatment and noticed the posts.

 

Claims assessments and Digital

McKinsey discusses various digital strategies but one I find particularly interesting relates to claims assessments. Insurers are now using technology that lets clients take a picture of their damaged car and send it into the insurer. This allows for instant estimation of payment and cheaper assessments for the company.

Insurers are also using drones to get a complete view of damage. It allows them to not only access areal shots but it also can keep adjusters safe in areas that have had recent catastrophic events such as floods, earthquakes, and hurricanes. The use of drones does present some challenges. According to PropertyCasualty360, drones are required to be registered with the FAA, need an exemption to be used commercially, and require a licensed pilot. Despite all the rules, drones are proving to be worth the challenges. Some zones are inaccessible or unsafe, drones provide information that insurers deem valuable.

replaces-drone

Telematics

Another technology trends isprogressive-obdc-and-flo telematics. Telematics involves user information to price insurance. When I think of telematics, Flo and the Progressive jump to mind. About a decade ago, Progressive launched the first version of user based insurance for discounted based on miles driven. Now companies collect large amounts of data directly from the car’s system regarding driver speed, miles driven, frequency of braking, and other driver trends insurers can build risk profiles and find correlations. There is some risk with using telematics to help price car insurance. There could be an adverse affect of self-selection. Bad drivers may not be willing to use telematics. This means that good drivers are providing usage data and receiving discount but companies are also lacking information from bad drivers.

 

Conclusion

Technology and digital innovation are helping almost all industries achieve expense savings and become more efficient in their business model. As discussed in class this semester, my fear lies in a level of efficiency that puts many of us out of a job. While advancements in driverless cars may at first appear to affect those such as taxi and truck drivers, the implication is much farther reaching. Lack of driver liability may very well put an end to car insurance as we know it. While innovation is sexy and exciting for some industries it may very well cause others to become extinct.

8 comments

  1. fernaneq4 · ·

    My mom owns an insurance agency through State Farm and I’ve worked in the office just about my entire life. We have seen countless fraud attempts as well as any other way to cheat the system. In 2011, the city drained nearby canals for some reason and about 10 of her clients had dumped old cars in the canal, reported them stolen, and received insurance money (insurance fraud). Not to mention, parents forging report cards to get the student discount, smokers saying they don’t smoke and really just full spectrum of events. I used to be the one to drive around and take photos of wedding rings or dents in cars for the agency. While a lot of the industry has gone digital, I have to say if I am submitting a claim, it’s nice to talk to someone. I like knowing exactly what I am getting into and insurance is so difficult when you don’t know it (red cars have higher insurance rates than others because your more likely to get pulled over or if something hits your car you can’t say it hit the ground first because then it’s your fault). There are so many querks with claims and pricing that I’m not sure how well telematics would work. Not to mention, people lie about everything! It is super cool to see the social media and drones aspect. My mom incorporates iPads and texting her clients but I’ll have to let her know to lurk on Facebook for fraud! Great post!

  2. Great post! I actually interned at an insurance company this summer and technology is definitely something that more and more companies are using. The older generation really prefers the brick and mortar buildings to talk to an agent, but many millennials are finally at the age of needing insurance and would much rather get a binding quote online instead of in a building. However, direct purchases are very low compared to agency purchases as of now so many companies aren’t necessarily too focused on it. In terms of making their product better, insurance companies are partnering up with a lot of small startup insurance helping companies like Coverhound and Coverwallet. They are able to develop products that make the insurance industry easier on both the users and the insurance company. Although insurance isn’t “exciting”, the advances and the future advances are actually quite exciting.

  3. Wow great post! Prior to reading this I really did not have that much education on this particular field. It was very enlightening to read up on. What really stood out to me was your statements on the drones the insurance companies are using. I find it amazing how they can use these drones to get up close to wrecks which will give them a clearer picture but also as you stated help the safety of those that would viewing them as they do not have to put themselves among the rubble.

  4. polmankevin · ·

    I like the idea of using social media to dismantle fraud but the successful applications seem few and far between. A lot has to go right to catch fraud through a social media post, the user has to have a public profile and be dumb enough to post something that ruins their story. I guess negligence is an insurance companies worst enemy and sometimes their best friend. I think twitter serves as the best platform for this type of stalking, but still probably doesn’t generate outstanding results. The use of drones is a really interesting and innovative way to gauge damage. Something I haven’t previously thought of but makes perfect sense. I love to see industries like insurance using tech to drive business results. Great post!

  5. Great post. I always love these examples of technologies in industries you might not normally think of.

  6. dabettervetter · ·

    You were very creative in thinking about the way insurance agencies use digital! I think they have it harder because the work they do does not make one think of digital business and social media initially. I love the examples of people filing false claims like the guy running after claiming injuries. My mom used to be a workman’s compensation lawyer and they would do similar “stalking” to see if injury claims were legitimate or not, even something as little as mentioning you are running in a 10K in an email that a lawyer or investigator has access to can give you away! We need to be aware of how much of our lives are documented for us on social channels!

  7. Very interesting post. I just read the article on this topic that was recently in WSJ. The more information that we put out about ourselves, the more we are at risk of someone wanting to use that information for their own purposes. Insurance companies are starting to get smart about this an leverage our personal information to both fight fraud and tune risk within our policies.

    It started with some devices that we install to track our driving (snapshot) and now is moving to the social world.

    Time to think twice before we claim disability and then post about how great it was to run a marathon

  8. Really good read, I find it pretty interesting that fraud costs insurance companies $40B a year, almost shocking really. I suppose this must be mostly with small claims that aren’t worth investigating b/c the cost to inquire may exceed the redeemed claims. These technologies seem to be a helpful way to mitigate these risks, especially in the small claims area where a simple photo could be all that is necessary to determine the veracity and intensity of a claim. That makes it harder for a body shop to work with a client to rip off insurers.

    Telematics is very interesting. Obviously it is a little creepy putting all that information about your driving into the hands of an insurance company. They offer incentives to everyone that uses them. Even people who exhibit bad driving styles can get discounts from using telematics. To justify giving bad drivers discounts on insurance, these technologies must really be effective at saving money!

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