How much motor insurance fraud

Wow!

Types of motor insurance fraud – cash for crash

So-called ‘cash for crash’ is one. Highway Code Rule 126 states that you should ‘leave enough space between you and the vehicle in front’ – meaning that the driver at the back of a collision is usually found at fault.

Criminal gangs will monitor traffic at stop-start locations (eg roundabouts, congestion areas), and those drivers or vehicles looking likely to have comprehensive motor insurance. For example, older people or mothers with children in the car.

Commercial vehicles are also targeted as deemed less likely to refute insurance claims.  They may have two cars involved, one to brake harshly in front of you, the second to tailgate to distract you.   An accident will then be staged and you will be liable.

Types of motor insurance fraud – fronting

Unfortunately, the pursuit of a cheaper policy could result in (or cost) the cancellation of the policy, or at least a claim refused.

Motor insurance fraud – how can telematics help?

Secondly, we have billions of miles of driver behaviour data that offers representation on the sorts of context and driving that does lead to an incident.  Our data determines driving ‘signatures’. In particular, ways of handling a car (I do NOT drive like my kids!), that can corroborate who drives a particular vehicle the most.  We can also scrutinize driving patterns.  For example, a vehicle being close to a roundabout for extended periods, which could indicate waiting for ‘crash for cash’ victims.

Why?

Motor insurance fraud – the main points

All this = Return on investment (ROI)!

Inflation busting telematics informed car insurance

It’s about the loss ratio, and the economics.  And the company culture, and the policyholder focus.  So how can telematics car insurance help beat inflation?

The numbers (illustrative):

A decade ago, the modus operandi of our energy and insurance sectors was straightforward yet arguably lacked efficiency. Traditional electricity meters were read manually with several months between each reading, with bills approximated based on these sparse data points. Simultaneously, auto insurance premiums were determined annually, a practice that largely neglected the fluctuating nature of risk factors.

Key equation:

Telematics costs must be equal to or lower than the reduction in losses incurred.  The areas where telematics can generate strong ROI are:

• Risk management – understand and act on ways to improve the driving behaviours of your policyholders to reduce their chances of having an accident
• Claims fraud – understand forensic detail of events around a claim to weed out fact from fiction
• Claims process – benefit from efficiencies in digital data and speed of resolution
• Claims liability – understand forensic detail of events around a claim to inform liability and court proceedings
• Customer retention – loyalty prompted by value and fairness; reduces cost (discount, marketing) of keeping that policyholder

Is that a business case approach?

So that is a business case approach, yes ?  The loss prevention benefit must exceed the cost of the technology deployment.  Three elements to moving forward: minimize costs, maximize benefits, evangelize this solution!  Let’s explore.

Minimize costs

Much has been written and said on app-based approaches.  The pros are evident – ease of sign up, adoption and usage, immediate generation and use of data.  The cost very much lower than costs involving an additional piece of kit, a telematics device or tag.  The cons are on the limitation on the very best claims data.  In addition, there is a necessary strategic view on IT investment.

Maximize benefits

An impactful driver coaching programme based on app-generated ‘scoring data’ is a considerable undertaking both in terms of skillsets and money.  The benefits are as yet unproven although the rate of adoption (particularly in the US) suggests some belief.  Claims management and resolution is more clearly appraised in the efficiencies realised through digital solutions, and the robust granular data powerful in court.

Lastly, more engagement with App-based tech has reduced customer service costs (more self-service) for insurers also.

Evangelize

The US leads.

Survey says of those offered telematics, 60% opted in.  Frequent inexpensive rewards have proved popular.  Along with accident assistance and anti-theft support. However, penetration is still low, at 5%.  In South Africa Discovery Insurance saw a 15% improvement in driving behaviours within 30 days of joining.  Surely positives and opportunities? Can the UK, Europe and APAC catch up, and offer fairer, better insurance for ever broader markets?