How is technology changing the auto insurance industry?

While some insurance companies have already made it possible to purchase and make changes to your auto policy online, many auto insurance companies have been slower to adapt to digital efficiencies.  

Getting an auto insurance quote can easily be done online, but the process of purchasing a policy from start to finish and reporting any lifestyle changes is not widely practiced in the industry without going through a broker and waiting for approval.  

However, more and more auto insurance companies are streamlining their processes and services online, with the goal of making the process more efficient for customers and expanding the range of what’s possible, from automation to AI.  

There is, however, some room for error in this approach, which is important for consumers to be aware of as the insurance industry continues to rely more on technology. 

How are auto insurance companies embracing new technologies?

Currently, many insurance companies still require customers to pick up the phone and speak with an insurance broker if they want to update their auto policy. This can be a time-consuming process that may involve a review of your current policy or being put on hold.  

There’s no denying that the ability to update your insurance policy online saves both the customer and provider time. That’s why certain insurance companies have already begun to introduce this option to their customers. 

“For example, a policyholder can log into their account and add a driver or vehicle,” says Jennifer Krasic, Lowestrates.ca insurance expert. 

Customers can also report changes to their mileage through their user portal depending on their provider without speaking to a representative, which can come in handy. 

“If there has been a change in lifestyle, i.e., the client is no longer commuting to work, they may wish to correct the annual kilometres driven with their vehicle,” says Krasic. “If the client has been set up with a market like CAA MyPace, the premium will be determined by the amount of kilometres driven as it's a pay as you go program, essentially, and you’re billed for every 1,000 kilometres driven.” 

According to Krasic, this process will likely evolve and catch on with more major providers. As traditional, big name insurance companies expand their services online, insured customers can expect more options when it comes to managing their policy details.   

Looking forward: What could AI look like in the insurance industry? 

In addition to streamlining policy changes for customers, artificial intelligence technology has already started to benefit the insurance industry at large. For example, TD insurance has used AI to help detect insurance fraud using its own risk scoring system, speeding up fraud claims. On top of that, other companies like the Canadian Life and Health Insurance Association and Équité Association also plan to use AI to analyze claims data and investigate fraudulent claims. 

But the potential to expand this technology to increase efficiency is vast.  

Usage-Based Insurance (UBI) and telematics already provide insurance companies with valuable data that can support AI in assessing driver’s risk levels to determine premiums that fit their profile. More specific categories of insurance may even be possible as risk assessment evolves — inside and outside the auto insurance industry — to better insure customers.   

“AI will play a vital role going forward, as ChatGPT will help offset the workload traditionally done by agents,” says Lambert Morvan, CEO of Onlia Insurance. But, he acknowledges, it can be difficult to elaborate on exactly how it will be used at Onlia without diving deep into regulation. 

In the meantime, some companies are already leveraging AI to help reduce the amount of time it takes to process a claim, answer straight forward customer inquiries, and even cut operating costs for providers — savings that could perhaps be passed down to the consumer.

“AI insurance can benefit anyone with a strong and honest knowledge of their insurance history,” says Krasic.  

Possible bumps in the road to AI  

Despite the time-savings that insurance tech provides, there are some risks and drawbacks users should be aware of as more companies begin to embrace the future.  

Some customers value the ability to speak to a representative, particularly those with complex questions. For example, an insurance company that relies too heavily on automated processes and less on person-to-person interaction may end up leaving questions unanswered. This could ultimately lower customer satisfaction and steer select customers elsewhere. 

Plus, managing your own policy could also backfire when it comes to accurately reporting your insurance details.  Policyholders are still accountable for the details they provide, whether to a person or a screen. Accuracy is key to an efficient, positive online insurance experience, as false information can be detected quicker and will only hurt your insurance record. 

“For auto insurance, you need to know your driving record,” says Krasic. “If not, you could be cancelled for misrepresentation. If a claim happens, it could be denied and your policy can be voided, making this a costly risk to take.” 

And as for implementation of AI processes, granting an AI system access to sensitive customer information when assessing risk can create a gateway for data breaches, jeopardizing the privacy of the insured.   

OpenAI, the founders of ChatGPT and other AI programs, recently faced a major data breach in which payment details and some conversations of a small percentage of users were unintentionally shared with others. Fortunately, Krasic believes the risk of a similar data breach in the emerging AI insurance market is low. 

“I don't believe there have been any cases in Canada where this has occurred,” says Krasic. “Insurance companies have a number of different safeguards in place to ensure they safeguard their data so I would assume there is very little risk to this occurring."  

For the time being, while policy changes can be made online by the customer, a representative will still need to confirm any changes or requests for the updated premium to take effect.  

And if the premium isn’t satisfactory, customers can decide to shop the market for a better rate.