Digital transformation has accelerated disruption across different sectors. The auto insurance industry is no exception. Auto insurance companies want to use technology to stay competitive. They also want to help customers more efficiently. For instance, browsing reviews of Progressive Auto Insurance reveal how these technologies benefit customers.
There are various ways auto insurance companies can maximize technology. Below are five strategies that can give you a competitive edge.
1. Applied AI
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Artificial intelligence and machine learning have changed how auto insurance companies work. A McKinsey report found that 25% of the insurance industry will be automated by 2025. The continuous improvement of AI technology drives this adoption.
Many innovative auto insurance companies take advantage of AI. For instance, some auto insurance companies use AI to automate the following:
- Claims processing
- Appeals processing
- Application processing
- Insurance pricing
- Document creation
- Customer service
- Claim fraud detection
2. Distributed Infrastructure
Auto insurance companies can now take advantage of distributed infrastructure. Distributed infrastructure divides complicated tasks into smaller pieces. Insurance companies use this to reduce the total cost of ownership. The reduced costs become evident as companies benefit from shared resources.
Insurance companies can use distributed infrastructure to improve customer service. For example, a company may allow customers to manage their policies through an app.
Cloud computing offers auto insurance companies the following benefits:
- Scalability
- Faster decision-making
- Easier access to data
3. Chatbots
Chatbots help auto insurance companies interact with customers. They are simple to integrate and can be used on a wide range of devices. Chatbots also benefit auto insurance companies by helping them save time.
Instead of answering the same questions repeatedly, companies can use chatbots. These bots can monitor customer interactions in real-time. This allows companies to focus on more complicated tasks.
4. Progressive Analytics
Now, insurance companies can use a tool called progressive analytics. This analytics tool helps companies identify the best way to fix problems. The tool does this across the entire company, not within a specific silo.
For instance, an insurance company discovers that it is spending too much money on a particular type of customer. With progressive analytics, the company can quickly act on these insights. It can alter its policies to address the issue. These analytics also helps companies track key performance indicators, measure success, and reduce costs.
5. Telematics Insurance
Technology continues to prove its worth in the auto insurance space. For example, telematics allows insurers to monitor customers’ driving behavior. The data serves as a factor for calculating premiums. This type of electronic monitoring can be applied to all sorts of driving.
Telematics provides insurers with various benefits. These include:
- Accurate risk assessments
- Fraud detection
- Income from the sale of policyholder data
- Customer convenience
Telematics technology continues to see advancements today. As a result, the auto insurance industry stands to see even greater benefits from it.
Disruptive Auto Insurance Business Models
The technological revolution gives car insurance companies the opportunity to change their business models for the better.
Peer-to-Peer Insurance
In P2P insurance, customers pool their money to create a collective fund. This fund can be used to pay for damages in the event of a claim. This business model provides several benefits to insurance companies and their customers.
These benefits include:
- Decreased overhead
- Increased customer satisfaction
- Greater customer retention
P2P insurance still has a few hurdles to overcome. These include the need for an efficient claims system and a way to mitigate fraud. Despite these, P2P insurance has the potential to become more popular soon.
Usage-based Insurance
Many auto insurance providers now offer a usage-based insurance (UBI) model. This model pays customers an agreed lump-sum amount after they complete a certain mileage. UBI relies heavily on telematics. The technology uses sensors to track a vehicle’s speed, location, and other data.
UBI is becoming an increasingly popular option for drivers. This insurance model allows car owners to pay lower premiums by driving within the limits set by their insurer.
Pay-As-You-Drive Insurance
Pay-as-you-drive (PAYD) insurance is another emerging technology in the auto insurance space. This insurance model allows customers to pay a fixed rate for insurance based on the number of miles they drive.
To keep premiums low, PAYD insurance providers rely on telematics to track how many miles a customer drives. The data then influences the customer’s premium at the end of the policy period.
Pay-How-You-Drive Insurance
Many auto insurance companies now offer pay-how-you-drive (PHYD) insurance. The PHYD model uses telematics to measure how safely customers are driving.
Based on the data collected, customers receive discounts or pay higher premiums. For example, customers who drive fewer miles may get lower premiums. Similarly, those who drive more miles may have to pay a surcharge.
Conclusion: What Should the Auto Insurance Industry Expect?
As technology continues to change the auto insurance industry, new business models will emerge. These technologies can help cut costs and increase companies’ efficiency. New technologies may also improve risk assessments and enhance the customer experience.
Many car insurance companies will adopt telematics or UBI, so they can compete. But the real disruptor in this space might be AI. Artificial intelligence will be more prevalent in the insurance sector as it becomes more sophisticated. Insurance providers may soon rely on AI to it to assist with various services, from claims management to risk assessments to customer service.
Ultimately, though, companies that can use technology to provide their customers with better value will win in the long term.