More Auto Insurance Companies Are Using AI to Analyze Claims

There were nearly seven million car accidents in the United States in 2018, and many of those resulted in vehicle damage. The process of filing an insurance claim and waiting to get a car or truck repaired can take weeks. Fortunately, the disruptions caused by lengthy claims processes may soon be a thing of the past.

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More insurance companies have taken to using artificial intelligence (AI) to help analyze claims and spot fraudulent claims. The increasing use of this technology allows insurers to keep costs down, which could lead to cheaper rates for customers.

An app, a claim, an accurate estimate

Companies like Tractable have already developed apps that can assess vehicle damage. In the U.S., auto insurance is regulated by the states. This patchwork set of rules and regulations has proven difficult for companies like Tractable, who have yet to make their app widely available in the U.S. Even so, the pandemic has increased demand for this type of technology because it lets insurance agents do their work safely.

These apps employ algorithms that can look at a photo of a damaged car or truck and determine what is wrong and figure out the cost associated with parts and labor. Not that long ago, a customer would have to call their insurance agent and wait for an assessor to come to inspect the vehicle, which could take days.

“In a typical process, an insurance claim representative has to examine 30-plus images and try to identify damage to the vehicle,” says Shayne Sherman, CEO of Techloris. “The claim representative also has to spend a lot of time talking to the policyholder to collect additional details. Instead of waiting for a human being to review your claim, an AI system will analyze the data you submit and return a response in an instant.”

Several insurance companies are already on board. Liberty Mutual launched Solaria Labs in 2015 to develop technology that would improve the customer experience. The company has developed an AI-based tool for its appraisers that helps streamline the claims process. USAA partnered up with Google to create an algorithm that can spot vehicle damage. The images are processed using Google Cloud’s Vision API. From there, the inspection results are then sent to a third party — Mitchell International — which creates a parts-and-labor estimate. The Spanish auto insurer Admiral Seguro uses Tractable’s technology. Customers can go through almost the entire claims process, including payout, in a matter of minutes.

“AI can manage the first notification of loss (FNOL) by talking to the policyholder and gathering all of the relevant details while processing the images and FNOL report,” adds Sherman.

How does a driver benefit from this technology?

Car accidents are stressful events and not just at the time of the crash. AI could potentially transform how claims are handled, but some questions need to be addressed.

“What happens to the staff member that is now obsolete because their company purchased an AI solution?” says Zach Shefska, CEO and Co-founder of Your Auto Advocate. “What happens if the AI solution proves to be ineffective or have issues? How can insurance companies retain a friendly business when AI is running their customer relations?”

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    The obvious answer is that customers won’t have to wait as long to find out about their vehicles. AI can trim days off the process. There are also some hidden benefits to the use of AI.

    “I  believe artificial intelligence will make insurance cheaper,” says Sherman. “AI will reduce the cost of insurance for policyholders and insurers. These savings will be accomplished by more active and low-cost claims processing.”

    [ Read: Steps to Switch Car Insurance Companies

    AI can process claims faster than people. This means insurance companies may not need to hire as many people to handle this part of the job. These savings could be passed onto customers in the form of lower rates.

    AI can also save consumers money in another way. The technology is built using tens of millions of images. The system is sophisticated and can spot fraudulent claims. For instance, say someone sends the image of a damaged car they pulled from the internet. Well, there’s a good chance the AI was fed this same image during training. The picture is flagged, and the insurance company is notified. The technology has seen perhaps every possible type of scratch, ding or dent imaginable and can spot something that doesn’t look right.

    “The fraud prevention component may be a direct benefit to the insurer, but I’m convinced that a reduction of fraud will benefit customers, both in terms of price and service,” explains Dr. Paul van Loon, head of analytics at Forecast.

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    Image Credit: Kehan Chen/Getty Images

    Eric Wilson Edge

    Contributing Writer

    Eric Wilson-Edge is a freelance journalist who has covered personal finance, banking, the economy and other topics for The Simple Dollar, The Seattle Times, Narratively and elsewhere.

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    • Andrea Perez
      Andrea Perez
      Personal Finance Editor

      Andrea Perez is an editor at The Simple Dollar who leads our news and opinion coverage. She specializes in financial policy, banking, and investing.