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Is Insurance Ready for Virtual Reality?

Virtual reality (VR) is no longer a technology reserved for the gaming industry. The applications are manifold in industries such as education, engineering, healthcare, insurance, sports and telecommunications. But, unlike other technology disruptions such as telematics, IoT, mobile, digital and cloud, which I have outlined in a previous blog, VR is yet to catch up in terms of adoption by insurers.

However, there are some applications from which the early adopters of this technology have started benefiting and others from which they could soon start benefiting.

Current Enterprise Applications

The Applications: VR simulation of car crashes – Insurers better understand what happens in a car crash for a safety demonstration

The Benefits: Improvement of driving behavior by creating awareness on safety and reducing accident claims

The Early Adopters: Australian insurer NRMA Insurance built a car crash simulation in collaboration with an ad agency and a film production studio and provided the experience to customers through an Oculus Rift headset in a crashed car showroom exhibit.


The Applications: Training – Safety experts and workers in manufacturing plants and warehouses are trained on safety practices and risk handling by creating a virtual world with various scenarios

The Benefits: Immersive and effective training experiences

The Early Adopters: Travelers insurance is working with AppliedVR in developing a VR mobile application aiming at industrial safety


The Applications: Advertising – Ad campaigns in VR gaming and on other platforms

The Benefits: Connecting better with the tech-savvy audience

The Early Adopters: Axa partnered with Google Niantic Lab Ingress to protect the gamers in a virtual real world using Axa Shield.


Ideas Insurers Can Explore

The Applications: Risk Assessment – Underwriters can look at all the possible risk hazards in a building without actually visiting the building.

The Benefits: Cost saving on travel and hiring

The Early Adopters: Insurers can steal ideas from the travel industry and see how they can customize VR for their needs. Marriott Hotels “teleports” guests to places like Hawaiian beaches and downtown London with sensory experiences.


The Applications: Analytics – Data scientists can analyze and visualize large dynamic datasets in VR, and executives can interact with the dashboards and take decisions

The Benefits: Quick and informed decision-making, scenario analysis

The Early Adopters: Insurance industry can draw inspiration from solutions developed for power, oil and gas and logistics industries. Space-Time Insight has recently demonstrated the capability of big data analytics and VR for power substation maintenance using Oculus Rift.


As an array of companies such as Google, Facebook, Samsung and Sony beef up their investments in VR and the number of enterprise applications spread across industries, the technology will soon prove to be disruptive for the insurance industry. Though customer experience, product demos and employee engagement are the key applications for the insurance industry, the ideas could be limitless as the technology matures. The day when we will compare the insurance product, take a driving test, purchase by interacting with an agent and talk to the customer care executive for claims, all through VR, is not too far away.

How Analytics Can Prevent Fraud

What is common between Uber, Amazon, EE, Vodafone, Netflix and Progressive? All these companies have recently faced issues because of fraud.

In insurance, ghost brokers often target young drivers who want to cut the cost of their car insurance. Even though it is the ghost brokers who commit the fraud, the customers lose their cash and also risk a criminal record. And fraudulent claims from customers is a much bigger concern for insurers.

How big is insurance fraud?

The Coalition Against Insurance Fraud, America’s anti-fraud watchdog, estimates that nearly $80 billion in fraudulent claims are made in the U.S. annually. Fraud increases insurance premiums, raises the cost of goods and services and boosts spending on investigation and fraud-prevention programs by insurers.

Fraud is one among the many business challenges that insurance industry is facing, as I have outlined in my previous blog. IDC estimates that insurers spend approximately $100 billion on IT, of which $3.3 billion is spent on information security and to counter financial crimes. Four of the five biggest property & casualty (P&C) insurers have formal anti-fraud programs.

Analytics to detect insurance fraud

Though application fraud, underwriting fraud and premium fraud are also significant threats for insurance business, claims fraud has been the industry’s main focus. Major insurers started deploying new platforms to transform their claims management and minimize fraud. There is a spectrum of vendors from big IT players to niche analytics players that is providing claims fraud detection solutions. Zurich’s UK general insurance business recently deployed end-to-end claims management transformation in association with a major insurance vendor, which minimizes losses associated with fraud.

Manual detection of fraud is next to impossible in the insurance industry, as it is costly and the sheer volume of claims is too high to handle for any insurance company. Also, the velocity, the variety and the veracity of data generated in the claims handling process made the use of statistical models based on sampling methods obsolete.

Because analytics integrates data from diversified channels and combines internal data with third-party data, effective fraud detection can be made possible. Many insurers have started using analytics techniques such as reporting, descriptive analytics, predictive analytics and prescriptive analytics to detect fraud. For example, CNA, the 8th-largest commercial P&C insurer, implemented analytics and predictive modeling to identify claims fraud. In two years of implementation, CNA reportedly saved $6.4 million, attributed to recovered or prevented fraudulent claims.

In this post, we will see how insurers have started adopting innovative technologies along with analytics to detect insurance fraud, beyond traditional analytics techniques.

Social network analysis

A recent AM Best survey found that more than half of the companies surveyed use social media. Life insurance companies appear to be most likely to use social media (65%). Company size is also a driving factor for social media. The larger the company, the more likely it is to use social media. Insurers have also started using social media data of policyholders to investigate and detect claims fraud. For example, if a non-smoker applicant lights up even occasionally and if his social pages has the traces of that information, it can be detected via social network analysis (SNA) tools. SNA tools scan large amounts of data from business rules, statistical methods, pattern analysis and network linkage analyses to uncover possibilities for fraud.

Drones

Insuring drones and wearables is going to be difficult for insurers, as there are a multitude of insurance liability and coverage issues. However, insurers have started using drones for their benefit by adopting them in claims adjusting. USAA appointed its first drone pilot for claims handling. With drones in place for claims handling, insurers would no longer need to climb dangerous chimney or to visit catastrophe sites. Also, the data analysis from drones is used to detect insurance fraud. A British company, Air & Space Evidence, detected a fraud case after Hurricane Katrina with the help of drones. A couple who claimed that their home in New Orleans was severely damaged by wind and water was found to be committing fraud when aerial photos showed that the house was intact.

Wearables

One third of the insurers surveyed are already using wearables for customer engagement, according to Accenture’s 2015 technology vision report. We all know that disruptive technologies such as telematics and wearables (Oscar’s Misfit, Fitbit and the Apple Watch) have also begun to be used for calculating customized premiums. What’s new is, in Canada, data from a Fitbit wristband was used by a personal injury lawyer to support his client’s case. Soon, these technologies will also be used to detect insurance fraud as the data collected from these devices will become fodder for criminal and civil litigation. Insurers now have many reasons to turn to innovative technologies and analytics to protect themselves against fraud.

Please share your thoughts on how you have seen innovative technologies and analytics helping insurers to combat fraud and transforming the insurance industry. In the next few blogs, I will try to explore analytics’ role in the insurance industry in further detail.