Rising Auto-Insurance Claims Costs
“As the year 2018 is coming to a close, the trend of rising claims costs within the Auto-Insurance Industry continues to climb to newer heights.”
The Zebra, a website that performs an annual report of the Auto-Insurance Industry within the United States with more than 50 million quotes compiled, states that “auto insurance rates have climbed more than 20 percent (in total) since 2011.” A recent study by Deloitte shows that a 29% drop in the net income of the overall insurance industry was created by the significant losses incurred this year and increasing claims cost within the Auto-Insurance Industry. James Lynch, Chief Actuary for the Insurance Information Institute, was quoted in the Deloitte report stating that “if the cost of claims continues to rise, rate increases are inevitable.”
Many experts believe this large uptick in premiums, and more specifically, claims costs in recent years are due to the increase of distracted driving, the expensive repair costs of damaged high tech sensors on cars, and the significant losses incurred from this historic hurricane season. A USA Today study states that, “while low oil prices and an increase in jobs have been a boon for Americans, they've also led to more cars on the road and a higher frequency of accidents. The result: Insurance goes up. This is especially true in urban areas, where the populations are higher.” Thus, leaving many Auto-Insurance companies scrambling to find a solution to this problem in order to keep their consumers happy and their profits growing.
The Auto-Insurance Industry has turned to technology to solve the growing issue of rising claims costs. Furthermore, Artificial Intelligence (AI) has become a major focus of these Auto-Insurance companies because of the impressive savings that can be accomplished when partnering with an AI company. Galaxy.AI estimates that the current cost of claims adjudication is around 80 billion dollars. However, this high cost could be significantly cut down to 26 billion dollars by using Galaxy.AI’s machine learning claims processing software. As a result, Auto-Insurers could save up to 70% in claims adjudication by partnering with Galaxy.AI. This is due to the increased claims processing efficiency, enhanced fraud protection, and higher customer satisfaction that will occur from implementing Galaxy.AI’s software product. An Ernst & Young report explains that, “what lies ahead: IoT and automation are no longer being considered as an innovation but have now emerged as the core components of an insurer’s survival and growth toolkit. While insurers have been investing in these technologies in recent years, wider on-ground implementations have now started happening and the impact of results achieved will decide which insurers lead the market in the future.”