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| December 1, 2023

Evolution of Car Insurance Renewal and Claims with AI-Based Technology

As of 2022, there were over 21 crore two-wheelers and over 7 crore registered four-wheelers in India (Source). With the number of vehicles seeing a significant surge and increased risks of road accidents, car insurance renewal prices are expected to go up as well.

If you end up missing the renewal date, you have to request an inspection and get approval on the same which takes its fair share of time. In many instances, this approval time-frame may get extended depending on the parts that are covered under the policy. During this period, the vehicle cannot ply on the road.

Even today, several insurance companies still rely on the manual processing of paper documents for motor insurance policies. However, the emergence of AI is all set to change that. AI-based inspection process can empower insurance companies to undertake tech-driven operations for insurance procedures in an easy way. Also, according to McKinsey & Company, AI-enabled automation functionality will replace more than half of all insurance claim process activities by 2030.

The Need For AI-Based Automation

Insurers these days must be aware of the ecosystem in which they operate. Even the clients are demanding for a more convenient insurance claim procedure. According to IBM Institute Business Value (IBV), more than 50% of the customers prefer tailor-made products based on individual quotations.

It’s a fact that the automotive industry is becoming increasingly autonomous, allowing car manufacturers to closely monitor incidents and generic driving behaviour; the focus on risk management is constantly increasing. This, ultimately, necessitates changes in the insurance industry. To begin with, the use of artificial intelligence, machine learning and data analytics driven by cloud-based technology will enable the industry to flawlessly adapt to market expectations.

Undertaking Remote Car Diagnostics

One of the best use-cases of AI technologies in the commercial and passenger vehicle insurance is that it enables remote delivery of crucial services with minimal need for physical infrastructure. Cars these days are getting smarter with the integration of IOT (Internet of Things) that offers key telematics and data regarding automotive functionality and behaviour.

(Volvo developed its Sensus Connect Infotainment System based on Cloud for improved navigation/ 3D maps, Local Search, and an option to send destination instructions remotely – helping simplify car ownership).

Thus, AI-powered diagnostics help car insurers gather and process data through various sensors and have a thorough evaluation of the vehicle’s condition, ultimately reducing operation time for car insurance policy renewal and claims.

Working of AI-Based Claim Procedures

The sync between the insurance company and the client is based on the premise that both the parties are pursuing to avoid potential loss and the client is in pursuit to avoid the decline in the IDV of the vehicle. Practically, there are breakdowns or damages that require a claim process to be implemented. An AI-based one will be automated keeping the following aspects in mind: -

  • AI-based automation is convenient to not only generate the brief for the damage but also the estimated cost for restoration.

  • AI-ML techniques, with the input of vast data, can accurately estimate the average cost of the claim for a wide clientele, for both technical and non-technical damages.

  • The system specializes in sending real-time updates and, in turn, enables the implementation of anticipated maintenance, that too in a fraction of the time.

  • AI-based automation in car insurance claims makes the reliance on workshop quotations less significant, which are often highly overestimated.

Enhanced Risk Management and Reliable Pricing

Mainstream insurance premium is evaluated by the “Cost-Plus” method. It includes an actuarial assessment of the risk premium, a component for direct and indirect costs, with the margin. However, it does have some limitations.

The major drawback it has is the inability to determine the pricing of non-technical components, as well as the inability to react to changes in market positioning. These days, however, all these aspects can be commanded by leveraging AI, coupled with IoT data that offers real-time evaluation and customized pricing of schemes.

Furthermore, insurance companies can use a host of other sensors and cameras to generate reports through data from previous claims. All this information gathered undergoes analysis via algorithms to reliably determine risk profiles.

Fraud Detection

The introduction of AI-based car inspection and insurance procedure is a giant step forward in preventing auto inspection fraud as the system can identify cover-ups which gets missed by human-eye, that is when AI comes into the picture.

Summing It Up

Going forward, modern vehicles integrated with IoT will certainly be more reliable as real-time consistent repair costs, ease of insurance renewal, and processing of claim payments will become more efficient, thereby reducing cost and turnaround time for claim procedures.

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