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How will AI change the customer experience of car insurance?

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Consumers expect service and support to be quicker and easier than ever. 

A 2023 Salesforce survey of 14,300 people found that 80% of customers consider a company’s customer experience to be as important as its products and services. The survey also found that 73% of customers expect better personalisation as technology advances.

According to Zendesk's 2024 Customer Experience Trends Report, 59% of consumers expect their interactions with companies to change radically within the next two years due to advancements in AI.

Insurance companies have usually been slow to change because they're big and don't like taking risks. But with people wanting more these days, are insurance companies in danger of falling behind?

In this article, I look at how insurers can improve their customer experience using technology such as artificial intelligence (AI). It's a tool that can be used to enhance all aspects of the customer experience, from speed of claims to the ease of accessing policy information.

I look at 3 possible opportunities for AI deployment and some potential obstacles.

AI is used to digest and analyse large quantities of data. It’s already being used by ecommerce, tech, and other digital brands in customer interactions. As the insurance industry is built on a colossal amount of customer data, it’s well-positioned to benefit from this technology, too. 

Insurers could use AI to serve personalised policies to their customers. Customers could say what policies they want. An AI service could use that information to build a policy that fits their needs.

This would make the process of finding the right policy easier for consumers. As Salesforce’s 2023 study shows, better personalisation is something 73% of customers expect as technology advances. It would also allow consumers to only pay for the exact coverage they want and need.

Of course, insurance policies are already personalised with premiums based on the data customers supply. In the case of motor insurance, this data includes driving mileage, the customer’s address, and driver behaviour.

But AI could take this to the next level, making it easier for customers to select their desired policy. For example, the customer could enter the exact level of coverage they want, and an AI tool could build this policy and price it almost instantly. 

Of course, certain parameters will still need to be set by the insurer, such as a top level of mileage. This would help them limit the level of risk they’re exposed to. 

In the UK, most customers purchase their car insurance through a price comparison website (PCW). Assuming both insurers and PCWs can use a similar technology, then customers could access AI personalised policies through a PCW like Confused.com. 

Either way, offering additional personalisation has benefits for insurers as well as customers. After the general insurance pricing practices (GIPP), insurers should offer the same price to two customers who have the same needs. Regardless of whether they’re existing or new customers. Such personalisation can help them make the case for different pricing and offer a lower price to consumers. 

Before chatbots used AI, most customers were unhappy with their interactions with these tools.

Gartner research found that only 25% of customers who had used a chatbot said they’d use one again. Another study from the same period by Userlike found that what customers liked most about chatbots was that they responded quickly and were available outside work hours. They didn’t like that the bots didn’t always understand what they were asking.

AI has changed this by improving the ability of chatbots to understand what customers are saying. Now, AI chatbots use natural language processing (NLP) to understand customers’ conversational queries. Then, the AI chatbot responds in natural language, too.

It’s like talking to ChatGPT. The bots are now trained on so much language data that they can understand almost anything customers say.

That said, there’s no data on customer satisfaction with these new and improved chatbots. It’s still too early for any surveys to be published.

As the tech evolves, chatbots could improve how customers interact with insurers. Typically, to speak with a human customer support operator, customers need to wait in line for a response from a call centre. If you’re passed on to a different department e.g. claims, you may have to repeat the information you’ve just provided.

According to Salesforce’s 2023 study, 79% of customers expect consistent interactions across departments. Yet 55% say it feels like they communicate with separate departments rather than one company.

AI chatbots could remove this frustration. For instance, insurers could use chatbots to manage simple customer queries about their policies.

Customers could simply ask chatbots for details about their policies, such as “How much is my excess?” or “Am I covered for…?”. This way, customers wouldn’t have to go through their policy documents whenever they have a query. And they wouldn’t have to ask customer service staff either, freeing up space to tackle more complex issues.

However, is speaking to an AI chatbot any easier than looking through a document or website? It may be for some customers, such as younger audiences who are used to it. Others might prefer a form-filling process.

Plus, in some instances, such as stressful claims, customers may prefer the human experience. In the future, I could imagine human interactions as part of a premium offer or as just an option that customers can choose from. However, if AI technology becomes good enough, many customers may not be interested in paying more for human support.

Another area where AI could be used is in claims. In fact, it already is, with new insurance brands such as Lemonade using AI within the claims process.

The most important benefit is to improve the speed of the claim. Lemonade broke the record for the fastest claims process ever—just two seconds—in the case of a bike theft. This was a very simple claim, and such a speed is probably unrealistic for most claims. More complex claims are likely to be slower, yet the opportunity for improvement remains. 

A related issue is cost. If insurers can process claims faster, they can reduce the expenses involved in the claim. Take the example of courtesy cars. If an insurer has to hire a car for a customer for two weeks while the claim is processed, the costs add up. With faster processes, that rental can be shorter. And that means lower premiums for customers, too. 

Many customers may like the idea that the claims process is entirely automated. For instance, they might see faster bank deposits when the claim has been accepted. Meanwhile, complete automation may build trust in the process overall. 

However, humans will still need to validate many more complex car insurance claims.

It’s unlikely that insurance customer experience will be fully automated any time soon. There are three main reasons for this.

Firstly, as studies by Gartner and Userlike have shown, the technology may not yet work as well as it could, with issues such as comprehension errors. So, customers are not yet entirely satisfied with the experience of the technology.

Secondly, insurers will need to check they have the right data to ensure customers are being served the right information. Insurers are already using lots of data. But for AI to use it effectively, it needs to be in a structured, machine-readable form. And it’s not a given that this is the case.

Before deploying it, insurers need to have 100% confidence that the technology works well. Insurance is a high-risk industry, with little room for error. If a customer crashes their car and has to speak with a bot that doesn’t understand—or, worse, provides wrong information—the reputational risks are significant.

The third issue is all about what customers think of this tech. Do they really want it, or are they okay with how things are now? If customers don't think it solves their problems, the tech probably won't catch on.

Smaller insurance companies such as Lemonade and Peppercorn are already leading the way when it comes to AI. If their technology is received well by customers, larger insurers will need to jump onboard to avoid being left behind.

Ultimately, it could be the question of cost that spurs insurers to action more generally. Cost remains king in insurance purchase decisions, with a 2022 Guidewire study showing that 86% of customers said they were worried about pricing.

If AI can bring down costs for customers—as the result of faster processes and lower claims costs—it’s likely to win them over. And then, more insurers may be willing to make the investment.

As consumer champions, we’re constantly looking for ways to improve the customer experience at Confused.com. And as customer expectations increase in relation to personalisation and the speed of interactions, PCWs need to respond to that.

One way we could improve the customer experience is to use chatbots ourselves to make it easier for customers to access insurer policies and any information they need. Or we could use an AI service to provide personalised policies to customers ourselves, based on insurers’ offerings and parameters. 

Another application of AI at Confused.com is in data analytics. For instance, we could use the conversations that customers are having with chatbots to provide feedback to insurers. This could help to improve customer choice and potentially reduce premiums, too.

New technology is unlikely ever to catch on unless it offers a concrete benefit. That’s true for AI too. It’s not enough just to automate processes or reduce human interactions if that’s not what customers actually want. 

Yet AI has the potential to improve the experience for customers. Faster claims and more personalised policies can also reduce costs—which could be enough to win customers over. 

Stay in the loop about the latest innovations and developments in insurance at Confused.com.

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