How is AI used in insurance?

Artificial intelligence (AI) has the power to transform the face of motor insurance. By uncovering new driving risk insights from GPS data, AI provides insurers with new intelligence for better risk forecasting, accurate pricing, and greater customer centricity. But AI in insurance does more than that. For commercial fleet insurers, it enables them to provide their customers with valuable predictive crash probability insights and recommendations to improve driver safety.

The power of AI in insurance

While the traditional motor insurance industry relies largely on group pricing, AI removes the need to rely on “proxies” such as age, vehicle type, location, and so on. In fact, it removes the need to rely on collision history or other lagging indicators. Instead, it analyzes driving patterns to predict the future, not the past.

Telematics has introduced an element of risk-based pricing to motor insurance. Telematics can identify driving “events” such as speeding and harsh maneuvers and is commonly seen as a way of pinpointing higher risk drivers. AI adds a new dimension to risk-based pricing. It analyzes every second of driving to predict future crash probability and climate impact.

The benefits of AI in insurance

There are multiple benefits of using AI in motor insurance. One is risk forecasting. Insurance companies have much greater control if they can predict the drivers most likely to cause crashes. It also aids risk management, supporting the predict and prevent model.

AI in insurance also provides insurers with valuable data to create attractive, personalized offers to incentivize and reward loyal customers. This can be a crucial factor in increasing customer acquisition and winning customers from competitors.

Data-driven insights enable usage-based pricing

AI arms insurers with more decision-making power than ever before to accurately price insurance premiums. And, because they have real-time insight into crash probability and climate impact, they can offer products instantly.

In fact, through a Crash Probability Score, insurers can quickly identify the 15% of drivers responsible for 50% of collisions because of risky decisions, and the safest, most profitable customers – regardless of vehicle type or geography. This facilitates precision group pricing or entirely new usage-based products.

Value-add for customers or partners

AI enables insurance companies to deliver increasingly personalized services. Fleet operators, fleet management companies, telematics partners or insurance brokers can expect to receive more meaningful communications, including deeper driver risk insights.

With knowledge about crash probability and climate impact, insurance companies can formulate suggestions to reduce exposure. This could include providing drivers with accurate feedback based on their driving behavior to make them aware of areas to improve their driving skills. Ultimately, this reduces claims and claims costs and helps customers with forward planning, specifically targeted driver training.

AI in insurance supports ESG and sustainability efforts

The importance of a transparent Environmental, Social, and Corporate Governance (ESG) strategy is growing for motor insurers. As is the need to provide more environmentally-friendly products for their customers.

With AI, insurance companies can offer safer, greener insurance solutions. With a Climate Impact Score, motor insurers can help drivers understand their own risk level and identify their CO2 savings in grams or percentage. They can even help to optimize EV battery miles and reduce battery charging frequency.