Tag Archives: autos

Change: ‘Gradually, Then Suddenly’

The phrase “gradually, then suddenly” comes from Ernest Hemingway’s 1926 novel “The Sun Also Rises,” when Mike Campbell is asked how he went bankrupt. “Two ways,” he answers. “Gradually, then suddenly.” These simple but profound words also apply to changes in the insurance claims IT industry over the last few decades, and to how today’s insurance industry leaders need to be thinking and acting to avoid the “suddenly” outcome.

The insurance claims process has changed enormously since 1980s. Back then, it was stubbornly long and involved many phone calls and messages, dozens of hours of effort, numerous different insurance staff, field appraisers, desk adjusters and managers, hundreds of local claims offices, rooms full of mail, mountains of paper, cavernous file storage facilities and a great deal of time and frustration for everyone involved. Today, most auto claims are being resolved “touchlessly” in hours or days through near-real-time digital exchanges among policyholders, insurers, repairers and claims service providers.

When one analyzes how we got from “there” to “here,” it’s clear that it did not happen suddenly but in fact very gradually. The first laptop was introduced in 1980. The internet and email started to appear within the insurance claims process around 1985, and shortly thereafter automated collision estimating software became available. The direct repair program (DRP) concept was introduced in the U.S. in 1990, the same year that the World Wide Web (today’s internet) became generally available, enabling communications and commercial relationships between auto insurers and repairers and allowing insurance claims staff and collision repair shops to communicate with one another electronically for vehicle repairs.

See also: Untapped Potential of Artificial Intelligence  

While DRPs grew to ultimately absorb well over 50% of all insurance repairs, not much else changed dramatically until 2007, when the first iPhone became available. It was not until the early 2010s that smartphone adoption exploded and insurers raced to adopt digital business platforms across the enterprise. In less than 10 years, the auto claims process moved to digital via smartphones and evolved into today’s nearly touchless process.

Moore’s Law and ‘Suddenly’

Therefore, “suddenly” actually occurred over more than 35 years. The slowness of these changes could easily lull one into a fall sense of complacency about innovation and disruption. But that would be a big mistake, and here’s why: Moore’s law will quickly turn “gradually” into “suddenly.”

Moore’s law, as many readers will know, observes that computing will dramatically increase in power and decrease in relative cost at an exponential pace. Today, this is known as exponential doubling, by which the pace of computing-based innovation driven by ever-cheaper technology will continue to double in ever-shorter periods. This pace will actually make “gradually, and then suddenly” redundant.

In terms of the “gradually” signals to which insurers must pay very close attention, the slow and steady entry by OEMs into the auto insurance and accident management process through connected car technologies requires strategic planning and responses sooner than later. In fact, all of the connected technologies—home, wearables, production facilities, buildings and smart cities—represent threats to insurers that do not understand, leverage and manage them before others do.

See also: Cognitive Computing: Taming Big Data  

So, it’s not your imagination that the world around you, including the insurance industry in which we work, is changing at an ever-increasing pace. It is, and, to compete effectively and survive, we will have to adapt our thinking and actions to exponential doubling.

Why Video Will Pervade Insurance

Video footage from dashcams or from cell phones that use driver assistance apps are becoming standard today. Some insurance companies are accepting dashcam footage as part of the claims process or are offering incentives (such as reduced premiums) to those who agree to install a black box or share their video feed.  According to the British Insurers Brokers’ Association (BIBA), there is already a fivefold increase in the involvement of vehicle black box technology during in-vehicle insurance policies.

If we judge by the increase in software companies offering video-based products specifically for the insurance industry, it is safe to say video is proliferating in the customer service and property evaluation aspects of insurance, too.

We anticipate this trend to grow even more in the years to come. This growth will almost certainly culminate in video becoming a standard for the insurance industry. The introduction of video opens a door to some amazing and innovative technological advancements. Video is not only the best channel for conducting communication with millennials, it is also a rich source of critical benchmarking information for unlocking opportunities, innovative customer service and practical applications. We can use video to build efficient workflows and back claims processes with accurate and factual evidence to increase response time and improve performance.

See also: FinTech: Epicenter of Disruption (Part 1)  

Vehicle insurance is a great example of the impact video can have on the insurance industry. Just a superficial look shows there is an infinite amount of information regarding your vehicle that is out there — be it from your own dashcam or cell phone, other call phones, CCTV, traffic cameras or home security cameras. Video is everywhere, and that is not all. There are some really interesting technologies that can analyze driver video footage when combined with real-time data retrieved from the vehicle’s own board computer (such as available via standard OBD2 connectors). These tools can show the average speed the driver is going and profile driving habits, such as keeping a safe distance, observing the speed limit, the times of day the driver is more (or less) active — and more. All this information can be compiled to provide an accurate and personalized analysis of driving and behavior patterns.

By centrally collecting all your video-based information, you gain the ability to combine several technologies that augment video input and provide a better all-around picture. Let’s face it: With the volume of business the insurance industry has, the way you manage your video must be able to perform and grow at the same capacity — while also complying with privacy laws and managing complex content access control policies.

Once video is collected, we also gain the video’s metadata consisting of additional information such as date and time. With this information, we can start augmenting our understanding of the video. We can use GPS to cross reference the driver’s location. Include weather tracking software to assess the impact of external driving conditions and combine this information to calculate the effect these conditions have on the driver’s ability to drive safely. We can use social media to understand specific road conditions for specific times and places, such as using GEO tracing for Twitter to monitor real-time complaints from drivers in a specific location at any given time. With all this information integrated and overlaid on top of video (either recorded or in real-time from the field), insurers are able to significantly increase incident processing accuracy and, over time, construct personalized profiles that can result in reduced policy costs and more efficient claim processing.

For example, insurers can initiate a probation process for new drivers where a certified mobile app is installed on their phones to be mounted on top of the vehicle’s dashboard. The app will record the drivers’ behavior overlaid with car data (such as taken from OBD2 or calculated from the video) and, after a set period of time, calculate insurance plan premiums based on personalized driving habits and issue feedback to the drivers. It would be interesting to see this kind of methodology implemented as a standard for all drivers and use the conclusions collected from all video and other complementary information to create a number-based score for drivers that indicates their objective risk.

See also: Connected Vehicles Can Improve Claims  

Apart from establishing driver ranking, there is so much more out there that can be funneled to help evaluate drivers, driving techniques, road conditions, vehicle performance and incidents. We are already starting to see sprouts of innovation making use of video that can ultimately improve insurance and the driving safety all around, from startups like DrivingBuddy and Nexar that aim to improve driver safety with real-time video feed analysis of driver activity to government and police initiatives aiming to crowd source driving and parking violation reports.