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The Future of Claims Disputes

May 13, 2014
Auto Insurance, Insurance
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Imagine it’s 1999, and you’ve been rear-ended in your car. Chances are, you don’t have a cell phone, so you or the other driver may have to find a pay phone to call the police. Later, you’ll have to get an adjuster to assess your damage, file your insurance claim and wait for a check to come in the mail. Technology has already changed the insurance claim process for the better. Most major insurers now have online claim forms, and if your claim is approved, you can have the amount direct-deposited into your bank account.

New technologies – including video conferencing and telematics, which are “black boxes” attached to cars that record speed and other information – have the potential to make the claims process even smoother, especially when there’s a dispute. Unfortunately, they also come with privacy concerns. So, how can companies and customers best use new technologies to their advantage – and how can they avoid the pitfalls?

What technologies could change claims?

The Internet has certainly made the claims process quicker and more convenient, but when it comes to claims disputes, mobile technologies could be the real game changers. The rise of cell phone cameras and apps for video conferencing, like Skype, can offer agents and adjusters immediate access to accident scenes and weather damage.

Jason Cass, owner/agent with JDC Insurance Group in Centralia, Illinois, notes, “The quicker you can get to the scene, the more information you can gather. Evidence is important.”

Telematics devices are currently promoted by some insurance companies. Large insurers like Progressive and Allstate use them to gather data about customer driving behavior – including speed, braking habits, driving distances and GPS data – and provide discounts, if users prove to be less risky than average. Of course, this data could also be valuable in the event of a crash.

According to Peter Kochenburger, the executive director of the Insurance Law Center at the University of Connecticut School of Law, “If you can determine a driver’s exact speed and turns, that’s probably more accurate than skid marks, and certainly eyewitnesses.”

How can data benefit companies and consumers?

Mobile technologies allow information to be gathered and transmitted more rapidly – a boon for consumers waiting on claims checks.

“It’s about efficiency and simplicity,” Cass says. “Our generation demands that.”

Moreover, the ability to record details right on the scene greatly reduces the possibility of fraud, both at the scene and after the fact. This has obvious benefits for companies. If an adjuster isn’t able to view the damage for several days, there’s always the possibility that drivers could receive additional damage and try to get it covered.

But, as Cass points out, it also benefits clients: “There are so many times you’ll hear your client call back and say the other person changed their story, even though they were standing right there. With mobile technology, you can record what’s going on so these sorts of things don’t happen.”

Cass also notes that technologies like video conferencing return some of the “personal touch” that online claims processes are lacking.

“Video conferencing helps you see information that you miss in email, like expression and tone,” he says. “It’s just one small technology, but it would definitely enhance the situation.”

While mobile technologies can finalize claims more quickly – before anyone can change their story telematics devices help insurance companies draw from a more complete set of facts when they make claims decisions.

Says Kochenburger, “GPS data gives insurers a more accurate sense of what actually happened, and can help determine fault. It will likely make it harder to argue with their conclusions.”

Likewise, it may become the deciding vote in a driver vs. driver dispute.

Even outside of an accident situation, Kochenburger suggests that telematics devices might help drivers make better decisions: “Drivers can gather information about their driving habits they might never have known before. Say you take Route A to work, and your insurance company thinks Route C is slightly safer. It could prevent accidents from happening in the first place.”

He adds, “For society as a whole, the more accurate information you have about an event that has consequences, that’s good.”

What are the drawbacks of increased claims data?

Of course, the more information a technology can gather about driving habits, the more information it can gather in general. And while video conferencing and similar technologies can be turned on and off – and used to gather information only at the scene of an accident – telematics devices gather information continuously, regardless if drivers are doing anything unsafe. This has raised the ire of privacy advocates.

Kochenburger believes there are reasons for concern, but the big privacy debates are still ahead. For now, he explains, “the technology is completely optional. That doesn’t end the privacy debate, but right now, a relatively small number of drivers have telematics devices in their cars.”

Issues could crop up if insurers gain the ability to mandate directly devices, or if premiums skyrocket – and telematics users earn major discounts: “If it’s not required, but the only feasible way to afford the insurance is to have a telematics device, privacy issues become much more important. In the future, drivers might not be able to afford the trade-off between protecting their privacy and obtaining the necessary insurance to drive.” The number of telematics users is also expected to increase quickly in future years, whether or not the devices are mandated.

The fact that insurance is required for almost all drivers also makes telematics devices – and the discounts based on them – ethically tricky.

Kochenburger notes, “There are advantages to individualizing premiums. There’s a sense of fairness that the riskier pay more. On the other hand, what if 30% of drivers are now going to be charged more because of their driving habits? We still want them to be able to drive to work. My concern is that big data can run counter to the one of the essential purposes of insurance, which is to shift and spread risk.”

While there are few downsides for insurance companies, when it comes to telematics, customers may want to weigh the risks. The data could save them time and money in the event of a crash, but it could also raise their premiums if their insurer has misgivings about their driving.

When will these technologies arrive?

In some cases, they’re already here. Insurers have yet to adopt the dedicated, Skype-enabled claims lines that Cass recommends, but he suspects they’re coming soon, especially for larger companies. Still, many drivers now have smartphones and can shoot video and photos on the scene. And telematics devices are available from several big-name insurers, though, as Kochenburger notes, they’re strictly voluntary for now. Those who have them, and smaller-scale GPS devices, can use them as evidence in court.

However, in Kochenburger’s opinion, this raises other issues. Telematics data can be difficult to interpret, requiring a computer scientist or other specialist, and again, there are privacy concerns to balance: “In a legal dispute, there has to be some symmetry of information. Anyone can talk to a witness or get the police report, but will an opposing party have access to another driver’s black box?”

There are still practical and legal hurdles to be surmounted before data from mobile and telematics devices can be used in all claims disputes. However, for better or worse, it seems inevitable.

Men exchanging information after car accident image via Shutterstock.