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.
My 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.
Another technology trends is 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.
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.