Artificial Intelligence (AI) already serves a significant purpose in people’s lives. Whether behind the scenes or at the helm, AI is being used in the healthcare, education and financial industries – and it’s even beginning to change the auto insurance business. 

As the decade unfolds, AI could impact your auto insurance policy, claims and costs. Moreover, as the adoption of AI increases, it can help drivers become safer on the road by avoiding accidents and collisions caused by human error.

Key Highlights
  • Artificial intelligence enables insurance companies to access data about driving habits and offer consumers more customized insurance policies.
  • Claims processing should quicken due to vehicle sensors and cameras that provide accurate details about what needs replacing or repairing.
  • Advanced Driver Assistance Systems (ADAS) offer high levels of assistance to drivers with warnings, alerts and automated technology.

What is artificial intelligence (AI)?

AI is the ability of digital machines, computers and robots to carry out and complete tasks that humans can do. AI comprises various intelligences, such as machine learning, reasoning, problem-solving, adaptation and language use, and it creates algorithms to make predictions and to avoid mistakes. 

While driving, humans might make mistakes because of distractions, inattention or tiredness, but automated devices can use algorithms to warn drivers. Read on to learn how AI in insurance could enable companies to provide more customized policies, better claims turnarounds and improved customer service.

How do car insurance companies use AI?

First and foremost, in the future, AI will allow agents to offer consumers more accurate quotes, customized policies and individualized premiums based on the data uploaded and processed about their driving habits through sensors and systems in their vehicle. 

AI auto insurance also provides countless benefits to insurance agents, customer service agents and underwriters. For example, AI is currently “augmenting” or improving the underwriting process, according to Business News Daily, even though underwriting still is being done by humans. 

However, underwriting could become highly automated with AI auto insurance diminishing the percentage of policies needing underwriting by a human down to the single digits. 

Sounds incredible, right? It is, and even though the auto insurance industry has historically been resistant to change, Business News Daily says automation and machine learning are pushing it toward a digital revolution.

How is AI affecting the auto industry?

Car navigation systems, emergency braking and adaptive steering all use automated or computer-based systems to improve driving experiences and mitigate the risk of injuries or accidents on the road. 

Artificial Intelligence (AI) has become a game changer in the auto insurance industry while automated processes have become essential to Automated Driving (AD) and Advanced Driver Assistance Systems (ADAS). 

ADAS use data and sensors to alert drivers to road hazards and help them avoid collisions. Consequently, drivers can use the warnings they receive to take specific action and to be safer on the road. Rear collision avoidance is one example of this technology; driver drowsiness detection – which sends a driver an alert when the position of their head and heart rate changes – is another. 

Other digital components in ADAS might include:

  • Adaptive cruise control
  • Blind spot detection
  • Lane departure corrections
  • Night vision with thermal sensing
  • Parking assistance
  • Pedestrian avoidance
  • Traffic sign recognition

Take an emergency braking system as another example. Not only is emergency braking automated in some cases, it also can tighten seat belts and integrate adaptive steering. Data on the effectiveness of these systems is compelling. The Insurance Institute for Highway Safety shows that reversing accidents are reduced by 17% with reversing cameras, and reversing accidents are reduced by 78% with automatic rear braking.

Does artificial intelligence benefit insurance consumers?

Yes – consumers benefit from AI through customized insurance policies. And, if they are good drivers, they can receive a better premium. Let’s take a deeper look at how AI insurance can benefit consumers. 

Data about your driving behaviors and habits downloaded from the smart technology in your car may be used to create an algorithm about your driving risk. Using this data, and other factors, a car insurance premium can be created uniquely for you. 

Policies, in part, can be based on data about how individuals drive. If that’s fast and haphazardly, policies and premiums may differ from drivers with better driving habits. As car insurance companies become more astute at using AI to assess risk, they can customize premiums or pay-as-you-drive policies.

Think of it as insurance policy customization, courtesy of technology. Auto insurance coverage once took more of a one-size-fits-all approach to coverage, which accounted for accidents, tickets and claims – and a jump in cost – at renewal time. AI insurance changes the nature of insurance from looking at past performance to using predictive analysis that looks forward.

Faster claims handling service

Another benefit: AI can reduce the claims processing wait time. The change could occur this way: Data and images from an accident are uploaded directly to an insurance company where the parts that need replacing or repairing are identified. These are then scanned against an existing parts database, allowing an estimate to be returned to the driver quickly. In some cases, the estimated turnaround could be completed in as little as a day, according to a McKinsey & Co. article.  

Already, computer vision (AI extraction of meaning from images), deep learning and AI are emerging to generate records of damage and to estimate the costs to repair that damage, according to Ravin Artificial Intelligence. Processes like these create more seamless claims experiences for the insurer and the consumer. McKinsey & Co. say that by 2030, more than half of all claims could be processed using AI-related processes.

Artificial intelligence chatbots

Consumers have seen the countless auto insurance commercials on TV – and they are overwhelmingly familiar with the gecko, the ostrich and the reckless man. If there’s anything that insurance companies want to avoid, it’s losing customers to other insurance providers. And that’s where AI chatbots can help.

In the past, consumers had to wait on the phone to speak with a customer service agent and those calls had to occur within a specific window. Around-the-clock chatbots change this experience and help by providing automated answers to some basic questions while avoiding wait times.

That’s not it, though. Chatbots also can be used to help in accidents and to aid drivers who have connected devices and smart technology in their vehicles. They may help a driver in an accident by suggesting what to do next, how to call for help or how to assist someone else.

Insurance pricing

Because AI can provide insurance companies with data about people’s driving habits, policies should become more customized based on determined risk levels. Insurers can use algorithms to determine how risky a driver is, which lends itself to more immediate pricing and policy availability, according to McKinsey & Company.

This decreases the back-and-forth between the agent and potential buyer, moving the cycle of pricing and purchasing closer to real-time, which benefits safe drivers because AI views them as low-risk.

And in the future, driving habits will likely affect flexible premiums. Say a driver chooses a risky route to a destination; the insurance company suggests a safer route, but the driver decides to take the risky route. As a result, their policy cost adjusts upward for the day and the increase is debited from their payment account. AI insurance could create pay-as-you-drive type policies, McKinsey says.

Fraud detection

Auto insurers lose about $29 billion in fraud annually. AI could more accurately reconstruct accidents through connected devices, sensors, cameras and stored data. Companies like Momentum Engineering are already specializing in accident reconstruction and forensic engineering.

Businesses like Momentum use data retrieval equipment to download information from ADAS systems to reconstruct car crashes. As the use of AI insurance continues to expand, the need for insurance companies to rely on the honesty and forthrightness of a claimant decreases.

Learn more: How car insurance fraud is investigated

Final thoughts: AI and car insurance

AI insurance will continue to transform the industry in the future. The auto insurance industry should offer better customer service, more individualized policies, streamlined claims processes and savings for safe drivers. And AI can make everyone safer drivers.

Learn more: What are the top 10 most important factors that affect car insurance rates

Resources & Methodology

Sources

  1. Apiorit. “AI in Auto Insurance: Possibilities, Challenges, Implementation Tips.” Accessed May 2023.
  2. Britannica. “Artificial Intelligence.” Accessed May 2023.
  3. Business News Daily. “How Machine Learning is Transforming Underwriting.” Accessed May 2023.
  4. CARADAS. “What is the Role of ADAS in Autonomous Driving?” Accessed May 2023. 
  5. Engineering Choice. “What is ADAS?” Accessed May 2023.
  6. GrapeUp.com. “How AI is Transforming Automotive and Car Insurance.” Accessed May 2023.
  7. McKinsey and Company. “The Impact of AI on the Future of Insurance.” Accessed May 2023.
  8. Momentum. “Services.” Accessed May 2023.
  9. Ravin. “How AI Is Radically Changing the Insurance Industry.” Accessed May 2023.
Laura Longero

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Laura Longero

Executive Editor

Laura is an award-winning editor with experience in content and communications covering auto insurance and personal finance. She has written for several media outlets, including the USA Today Network. She most recently worked in the public sector for the Nevada Department of Transportation.

John McCormick

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John McCormick

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John is the editorial director for CarInsurance.com, Insurance.com and Insure.com. Before joining QuinStreet, John was a deputy editor at The Wall Street Journal and had been an editor and reporter at a number of other media outlets where he covered insurance, personal finance, and technology.

Leslie Kasperowicz

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Leslie Kasperowicz

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Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like ExpertInsuranceReviews.com and InsuranceHotline.com and managing content, now at CarInsurance.com.

Nupur Gambhir

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Nupur Gambhir

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Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.

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Maggie has twenty years of experience working in media. She is a writer and editor on car insurance and related issues. Before joining CarInsurance.com, she reported on health, education and lifestyle for magazines, websites and newspapers in Nevada.