4 Ways Technology Is Changing Homeowners Insurance Claims

The use of technology by insurance companies to better serve their customers has increased exponentially over the last decade. And the trend is showing no signs of slowing down. But it goes far beyond just providing better customer service and staying ahead of the competition.

Insurance companies have realized new technologies can help them to reduce costs and allow them to manage risk more effectively.

Many consumers are also benefiting from technological advances that might lower their risk profile and reduce their homeowners insurance premiums.

Innovative business technology

Not All Insurance Companies Are Embracing New Technologies

Some insurance companies have been slow or reluctant to embrace new technologies. This has opened the door for insurtech companies to disrupt the insurance industry.

Insurtech is a combination of the words insurance and technology

“Insurtech is exploring avenues that large insurance firms have less incentive to exploit, such as offering ultra-customized policies, social insurance, and using new streams of data from Internet-enabled devices to dynamically price premiums according to observed behavior.”
Investopedia

There is a famous quote, often attributed to Charles Darwin, that says:

“It is not the strongest of the species that survives, nor the most intelligent. It is the one that is  most adaptable to change.”

New technologies represent change. In many cases, implementation has been slow. But change is inevitable and most insurance companies realize this.

How Technology Is Changing Homeowners Insurance Claims

Here are four ways technology is impacting homeowners insurance claims.

#1. Internet of Things (IoT)

Internet of Things (IoT)

IoT is technology that allows almost anything with an on and off switch to be connected to the internet. It includes everything from appliances, cellphones, lights, and machines.

According to IBM, there are millions of objects with embedded electronics that can transfer data over a network without human interaction. And it’s changing insurance industry dynamics. Some projections estimate there will be over 100 billion connected devices in use by 2050.

IoT can provide insurance companies with better customer data they can use to mitigate risk. It can also be used to help detect fraudulent claims. This is good news for consumers as it might lead to lower homeowners insurance premiums.

Here are some examples of IoT technology:

  • DetectIt is a smart IoT water sensor leak detector. If a water leak is detected an instant notification is sent to the property owner. As an early warning system it might prevent severe water damage.
  • IoT-enabled smart locks send users notifications whenever a door is opened to alert them in case of unexpected access.
  • Rabbit Air’s MinusA2 air purifier can remove 99.97% of mold spores from the air. Their app allows you to monitor air quality and control purification in your home whether you’re at home or away.

#2. Artificial Intelligence (AI) and Chatbots

Artificial Intelligence

Chatbots are a good example of Artificial Intelligence (AI) that simulates human interactions with customers. 81% of all customers attempt to handle matters on their own before reaching out to a live representative, according to the Harvard Business Review.

It’s a good alternative to phone calls as 70 percent of callers hang up while waiting for customer care to respond. And chatbots can take care of most customer needs 24 hours a day, 7 days a week.

Utilizing AI and machine learning, chatbots can walk a customer through the claims process or a new policy application. It is a cost-effective solution for insurance companies as human intervention is typically only required for complex queries.

According to some predictions, AI will power 95% of customer interactions by 2025.

#3. Drones

Drone and smartphone

Drones have been around for a long time. As drone technology is evolving, more companies are using drones for commercial purposes.

Insurance companies are increasingly using drones for risk assessment and calculation. Drones can survey large business premises, farms, and places that are hard to reach by humans.

In addition, drones can also be used to inspect potentially unsafe buildings that suffered fire damage. This can keep insurance adjusters out of harm’s way. Drones can take high-resolution photos of the damage and instantly transfer the images to computers.

#4. Predictive Analytics

Predictive Analytics

Predictive analytics are used by many insurance companies to help them better understand data to predict customer behavior.

A study conducted by Valen Analytics found a strong correlation between the use of data analytics and predictive modeling that lead to increased profitability.

The study found insurers that used data analytics and predictive modeling improved their loss ratios by 3% to 9% more compared to the industry average. And they grew their direct written premiums by 53%, significantly more than the industry average of 18% during the same period.

Without the use of technology it’s very difficult to effectively analyze all customer data. Through proper analysis, insurance companies can better predict:

  • The risk of receiving fraudulent claims.
  • Insurance requirements.
  • The likelihood that a policy will be cancelled.
  • Trends and patterns.

Conclusion

Technology is changing the world of homeowners insurance claims. Traditional, large insurance companies cannot afford to be complacent and will have to adapt to the changing environment.

If they choose to maintain the current status quo they will not only be unable to remain where they are. They will move backward as their competitors and new insurtech companies that embrace new technologies move forward.

The four ways mentioned in this article on how technology is changing homeowners insurance claims are by no means the only ways. We have barely scratched the surface of how technology is changing the insurance landscape. But by lifting the insurance industry veil we can catch a glimpse of what’s happening behind the scenes.

Technology is a good servant but a poor master. It will never be able to remove all human interactions or manage all insurance claims. There will always be insurance challenges that cannot automatically be resolved by technology.

For large or complex homeowners insurance claims it’s recommended that a public adjuster should be consulted. Unlike an insurance adjuster who acts in the best interests of your insurance company, a public adjuster acts in YOUR best interests.

Avner Gat, Inc. has over 15 years of experience as a public adjuster in Southern California. We protect homeowners from the games and fine print that insurance companies are known for.

Call us at (818) 917-5256 to find out how we can help you manage your homeowners insurance claim.