How technology is transforming claim settlement in motor insurance

In the age of digital transformation, technology has been a driving force behind the evolution of every industry, and the insurance sector is no exception. Right from improving customer experience to streamlining processes, technological advancements have been transforming the insurance sector at a rapid pace.

While the COVID-19 pandemic accelerated this trend, the pace has continued ever since, with the industry adapting to the changing needs, habits, and expectations of its customers. According to Capgemini and EFMA’s 2021 World Insurance Report, policyholders overwhelmingly expect insurance providers to understand their needs and expectations. In fact, 80 percent of respondents said that immediate responses to their requests are important to gaining their loyalty. 

These findings suggest that consumers are looking for more personalised and responsive service from their insurance providers. This is where technology comes in, making it possible to not only meet but exceed the expectations of policyholders. In the past, insurance largely remained a feet-on-street business; however, recent years have seen a rapid pace of digitisation in the industry. The digital shift is quite evident, with both customers and companies getting comfortable with the online medium. This has led to the development of new digital technologies that are making it easier for customers to compare policies, buy insurance, and file claims.

Role of Technology in Motor Insurance

Motor insurance is an essential financial product that protects drivers and their vehicles in the event of an accident. Not only does it provide financial compensation for damage to the vehicle, but in certain cases, it also covers medical expenses for the insured. It can also provide financial protection in the event of theft, total damage during a natural calamity, accident, or any other unforeseen event.

Take the example of the recent floods in different parts of North India which have caused widespread damage to vehicles. Viral videos of cars being washed away in floods, or simply being submerged in water, have been doing the rounds on social media. Motor insurance can be an important financial protection in such incidents.

Just like any other sector, technology is transforming the motor insurance industry. For example, telematics devices are being used to track a vehicle's location and driving behaviour. This information can be used to assess risk and determine premiums. Artificial intelligence (AI) is also being used to automate tasks, such as claims processing and fraud detection. This is freeing up human as well as financial resources to focus on more complex tasks.

Role of Technology in Claim Settlement

One of the biggest ways in which technology is transforming the insurance experience of consumers is through AI-enabled claim settlement. Claim settlement is the pivotal process through which insurance companies compensate policyholders for damages or losses covered by their insurance policies. Traditionally, it has been a complex and time-consuming procedure, involving extensive paperwork, manual verifications, and prolonged waiting periods. Technology has drastically reduced the turnaround time for claims, from weeks to hours, and even minutes. In some cases, it has even been reduced to seconds. For example, the New York-based insurance startup Lemonade paid out a claim in just three seconds, which is the fastest claim settlement in the history of the insurance industry. How did it do that? Simple. The customer filed his claim on the app. Just three seconds after he hit the submit button, his claim was paid. It was a world record. In a matter of just three seconds, the claims bot was able to review and cross-checked the claim. Not just that, it also ran anti-fraud algorithms before approving and paying off the claim.

While it may take longer than three seconds, technology has completely revolutionised insurance claim settlement across the world, and India is no exception. Let’s take an example of how a motor insurance claim works in 2023 compared to how it worked about a decade ago.

Easier, faster and seamless process

Let's say you are involved in a car accident in 2023. You can use your mobile phone to take pictures of the damage to your vehicle and the other driver’s vehicle. Your insurance information is already available on the app. The insurance company will be able to assess the damage and make a decision on whether to accept or deny your claim. AI has enabled insurance companies to assess the loss amount basis the video/pictures and take a decision on the claim instantly. If your claim is accepted, the insurance company will approve the claim and pay for the cost of repairs. In some cases, depending on the amount to be settled, and the quantum of loss, the claims can be processed instantly. In others, It would take only a couple of days for the entire process to complete.

In contrast, if you were involved in a car accident in 2010, you would have had to file a paper claim. This would have involved filling out a lengthy form and providing documentation, such as police reports and repair estimates. You may have had to visit the office of the insurance company a few times. The insurance company would then have had to investigate the claim, which could have taken weeks or even months. Clearly, modern technologies have made the claims process much faster and easier for both customers and insurance companies.

Which technologies are at play?

Insurance companies these days leverage Artificial Intelligence (AI), along with Machine Learning and advanced data analytics, to accurately measure the extent of liability and also to predict potentially fraudulent claims. Telematics is another technology that is being used in motor insurance.

Artificial Intelligence and Machine Learning

AI is playing an increasingly important role in the settlement of motor insurance claims. It can be used to automate many of the tasks involved in claims processing, such as assessing the damage to a vehicle, identifying fraudulent claims, and tracking the status of a claim. Machine Learning algorithms can be used to detect the extent of damages to the vehicles by just instantly analysing the photographs uploaded by the policyholder. This has enabled many insurance companies to instantly process the claim and make the payment through an app-based interface, providing convenience to the customer. In addition, AI can be used to improve the accuracy of claims assessments. It can analyse historical data and use machine-learning algorithms to identify patterns and trends. This can help to ensure that customers are fairly compensated for their losses.

AI can also assess the claimant's driving history and the circumstances of the accident to detect fraud. AI can also be used to track the status of a claim and provide updates to the claimant. This can help to keep claimants informed about the progress of their claims and reduce the number of inquiries to the insurance company.

Internet of Things (IoT) and Telematics

IoT technology has brought unprecedented efficiency and accuracy in the claim settlement process in motor insurance. With the integration of IoT devices into vehicles, insurers now have real-time access to crucial data, enabling them to assess accidents and damages more precisely. The continuous stream of information from connected devices, such as telematics sensors and GPS trackers, offers insights into driving behavior, speed, location, and vehicle condition. This wealth of data allows insurers to expedite the claim settlement process and has significantly enhanced their ability to provide seamless and accurate claim settlements, benefiting both insurers and policyholders alike.

Chatbots and Virtual Assistants

Chatbots and virtual assistants, which are digitally generated answers to frequently asked questions, can now handle most customer queries without the need for human intervention. This has made it much faster and easier for policyholders to get the information they need. Chatbots can access a vast amount of information about the specific customer and their policies, and they can answer questions in a matter of seconds. Chatbots are also able to provide 24/7 customer service without any waiting time, which is especially helpful for customers who have questions outside of business hours. Certain insurance companies are also exploring Alexa-enabled voice assistants and AI-driven video call assistants, taking customer support to a whole new level. 

The integration of technology in claim settlement is not just a matter of convenience, it is a strategic imperative for insurance companies. Technology is and will be the way forward for the insurance industry.

Nitin Kumar is Head - Motor Insurance, Policybazaar.com. Views expressed are those of the author.