Understanding the impact of new vehicle technology for underwriters

01-01-2021

Understanding the impact of new vehicle technology for underwriters

Jason Verlen, SVP product management, CCC Information Services

Accessing the value from driver data and advanced auto systems is easier than many carriers assume, argues Jason Verlen, SVP Product Management, Strategy, and Marketing at CCC Information Services. The sheer volume of information available to carriers may seem daunting, but there is huge value that can be found within it, in terms of both policy development and policyholder satisfaction.

Much of the technology that is driving the auto industry forward—from better safety features to driving data—is adding new complexity to underwriting. For example, many carriers may be unaware of the specific costs new advanced driver assistance systems (ADAS) add to vehicles, or how understanding individual driver behavior data can inform decision-making. Unsurprisingly, underwriters are struggling to keep up.

“Data access must happen automatically, with pricing tools easily integrated into insurer workflows.”

Despite the availability of a growing range of tools to help understand and use this data, some carriers are still hesitant about integrating them into their underwriting processes. There is perhaps the perception that these technologies will disrupt existing legacy systems, undermine the human resource or prove too expensive to integrate.

None of this is actually the case. There are already examples of carriers using the growing variety of auto and driver data to feed into artificial intelligence (AI) or machine learning (ML) systems to produce more accurate and personalized policies. These are naturally a win/win for carrier and policyholder in any number of ways, from reduced risk to lower premiums, more appropriate coverages that fit consumers’ lifestyles and long-term customer loyalty.

Intelligent Insurer spoke with Jason Verlen, SVP Product Management, Strategy and Marketing at CCC Information Services to understand how intelligent data tools are becoming normalized in the industry and how underwriters can use them to best effect.

This article is published ahead of Intelligent Insurer’s webinar “Understanding the Impact of New Vehicle Technology for Underwriters” on Thursday April 1, 2021.

What do you hope attendees will take away from this session?

Jason Verlen: Telematics is becoming more sophisticated and vehicle safety features are changing how drivers interact. While tried and true underwriting methodology has been reliable, it must now evolve. There is a lot we can know about an individual vehicle that can inform the underwriting process.

This webinar will take a closer look at how a digital approach can offer access to new, actionable insights. We’re also going to hear how one insurer is preparing for the future of mobility.  

What are the biggest challenges facing auto underwriters at this time?

Verlen: Stagnation. Applying decades-old risk models to newer vehicles, some so sophisticated they can park themselves, no longer works. Rethinking the approach to data would not only help insurers improve accuracy, but would meet the expectations of their customers.

Decreased miles driven over the last year, for example, may increase interest in usage-based insurance (UBI), while others may want installed ADAS features to reflect in their premiums. To distinguish between the two, underwriters must efficiently and accurately assess all available data at the point of quote.

It is also assumed that to meet the demand for digital and include capabilities such as AI takes time and an ability to demonstrate value to the business. This is easier to achieve than many assume.

What is the most valuable data underwriters can use to make informed decisions about policy development?

Verlen: Driving behavior has become one of the most valuable predictive variables available today. Classic UBI data, such as mileage detail, coupled with driving behavior data and installed ADAS systems are a powerful combination of insights. In the near future, we’ll likely have more visibility into how drivers are using ADAS systems and how well they perform. If insurers tap into this data, they can truly modernize risk assessment.

To maximize efficiency and productivity, data access must happen automatically, with pricing tools easily integrated into insurer workflows. Once running seamlessly on the insurer side, the benefits shift to their customers. They will find value in an easy, personalized experience and quotes that match their specific needs.

How far do you see AI or ML able to automate some of the underwriting process?

Verlen: The integration of AI in automobile physical damage claims is already making an impact. The same will likely happen in underwriting. Imagine if you had a clear view of the condition of a vehicle right at the point of quote. Now suppose the customer provided you with that information themselves in just a matter of minutes and from there AI uncovers vehicle detail you wouldn’t have otherwise.

Guided photo capture and AI analysis like this is happening now, modernizing the inspection process, and for some insurers, giving them an opportunity to introduce a virtual pre-inspection—uncovering things such as pre-existing damage, all through fast and intuitive digital methods. This is just the beginning.

How much can carriers depend on driver interaction with ADAS to mitigate risk?

Verlen: ADAS features impact risk quite a bit. Recent CCC research indicates that most drivers believe their ADAS features increase safe driving, and that nearly 70 percent of drivers feel entitled to a lower rate for owning a vehicle with ADAS. Most drivers plan to seek out ADAS features in their next vehicle.

When an accident does occur, the cost of repair due to sensor and camera replacement and recalibration can be significantly higher than for a less advanced vehicle. Or, a vehicle has ADAS features, but the driver turns them off because they are bothered by related warning alarms. This negates benefits gained from installing the systems, and insurers need this insight to price accurately. Regardless of presence or use, it’s more important than ever to have the ability to assess the risk on these vehicles properly.

How well-equipped are carriers to take advantage of this growing range of driver insight?

Verlen: In many cases, the foundation on which to build a more data-driven process exists. The first step for many is embracing the need to evolve and digitize processes. Not only does it make internal workflows more efficient and provide more actionable data as policies are being priced but it leads to overall better risk assessment, right at the point of quote.

Where are most carriers on their journey towards tech-enabled underwriting?

Verlen: The challenge, as with most new technology, is adoption. Just about every underwriting team we speak with wants solutions that speed and improve existing processes and enable access to data points that will help them become more informed and, in the long run, more profitable due to increased efficiency and accuracy. The key will be demonstrating how attainable this level of innovation, clarity and usability really is.

To scale with speed, it is important for insurers to find the right partners. For example, CCC can integrate new data within existing systems through APIs, which leads to a smoother implementation process and simpler adherence to carrier rules and data point preferences. Our team can start helping insurers access more data and become more effective with minimal disruption to their day-to-day activities.

Understand the impact of new vehicle technology on underwriting in this upcoming webinar.  

CCC Information Services, Artificial Intelligence, Cyber, Insurance, Reinsurance, Jason Verlen, North America

Intelligent Insurer