April 9, 2021
How Automated Claims Processing Can Transform Device Insurance
Mobile device insurance still has a way to go to catch up with other areas of the Insurance industry. EIP’s CEO Ross Sinclair explores why insurance doesn’t have to be boring, lessons learnt from roadside assistance and the role of automated claims processing in improving how device insurance is perceived.
Reminiscing about my mobile device insurance journey
23rd March 1998 was a landmark date for me. It was when I first entered the world of mobile device insurance when I joined the Carphone Warehouse as Managing Director of Insurance. ‘Carphone’ was one of the first companies to offer this type of insurance. In the 23 years since, this industry has taken me all over the world, from Seoul to Cincinnati; Johannesburg to Stockholm; Moscow to Miami – as MDI became exponentially more popular.
Whilst the devices and their functionality have changed beyond recognition (hence the photo showing the iconic Nokia 5110 which was the phone to have and coincidently released exactly 23 years ago today on 12/04/93), the insurance products that protect them have stubbornly refused to evolve. They look almost exactly the same as they did, back when I didn’t have any grey hair. That is, until now…
Introducing automated claims processing
Robotic process automation (RPA) is changing the mobile device insurance space – like it is across so many industries right now. Check out our recent blog on RPA in Insurance.
The technology makes it possible to streamline claims handling and processing. RPA ensures human intervention is only required for a small percentage of claims. For the large percentage, automated claims processing means customers can get decisions quickly, conveniently and without the usual hassle. We’ll get into the specifics later in the article.
Why insurance doesn’t have to be boring
Insurance has a bit of a bad rep. From suspicion over insurers wriggling out of paying claims to apathy over a subject viewed as traditional and boring. Insurance is for the middle-aged, right? It’s for unadventurous, ‘safe’, unexciting lifestyles. It’s for civil servants and auditors. I bet James Bond, Bear Grylls and Lady Gaga don’t think about their insurance very much. Automated claims processing can make insurance less boring, as the seamless experience doesn’t feel like insurance.
Lessons from the roadside assistance providers
There are valuable insurance products that have been around for years, that we don’t think of as insurances. Take roadside assistance, from Automobile Association (AA) or the RAC, for example. It’s just straightforward insurance against your car breaking down – but it doesn’t ‘feel’ like insurance. It feels more like a service, so much so that the publicity for the AA refers to it as ‘the fourth emergency service’.
So, why is this the case? Why doesn’t buying and using roadside breakdown cover feel the same as, say, home insurance? Well, for starters, there is typically no adjustment or negotiation of settlement values under roadside assistance. The mechanic turns up, tries to fix your car and if he can’t then he drives you home. Simple. He doesn’t lift his head from under the bonnet and say, ‘Oh dear, it looks like your overhead reverse-spring grundle-flange has gone, and I’m afraid that’s excluded from your cover,’ and leave you, the family and the dog standing in the horizontal rain at the side of the M25.
This is essentially a form of parametric insurance, where a clearly defined trigger for a claim (your car suffers a breakdown) prompts a clearly defined and pre-agreed action (fix the problem or get you home). By contrast, claiming under a home insurance policy can be a minefield. You have depreciation, overall policy limits, single item limits, proof of purchase, defined perils, specific exclusions, and so on. Automated claims processing works where there’s no little opportunity or motive to submit a fraudulent claim. I mean, you’re very unlikely to deliberately knobble your own grundle-flange just to stand at the side of the motorway for two hours. So, there’s no need to adjust the settlement.
Secondly, there is the matter of the excess. Generally, in roadside assistance, you don’t have to hand the mechanic £50 before he’ll drive you home but most other insurances require you to ‘contribute’ to the cost of the claim. Claim excesses discourage small claims. This approach by insurers to discourage you from using the policy for exactly the reasons that you purchased it further underpins the negative ‘feeling’ of insurance. Imagine if your roadside assistance only kicked in when you were more than three miles from home, on the basis that any closer than that and you could push the car home yourself.
Applying automated claims processing to mobile device insurance
So, back to mobile device insurance. Can we adopt some of the principles of ‘friendly’ insurances like roadside assistance to this product to not only make it perform better but also make it more accessible (and less boring) to a broader audience? If you read my blog on EIP’s unique Autoclaim functionality, powered by RPA, you’ll already know that the answer is a resounding ‘yes!’. Autoclaim makes automated claims processing possible. It detects when your device has been dropped and, after quickly checking with you that it’s damaged, automatically creates and processes the claim and arranges the device collection for repair – all in less than 10 seconds and with two button presses!
How automated claims processing works
How is this possible? Well, to understand the underlying principle it’s important to understand how claims patterns have shifted over the years. When I entered the industry, 70% of device (phone) claims were for theft or loss and 30% for accidental damage. EIP’s analysis found that now, more than 90% of device insurance claims are for accidental damage, which is perhaps to be expected given the larger glass screens and extensive use of devices nowadays. This holds up across different European countries as well. Romania leads the way at 98% damage claims, followed by Hungary, Italy and Netherlands (97%). Then comes Germany (94%), Spain (91%) and Ireland (90%).
Where we’re repairing or replacing the device with the same model, there’s very little incentive for a user to deliberately damage their device. The risk of fraud is very small. Also, by automating the detection process using the device accelerometer and gyroscope, we know not only that accidental damage has occurred, but also when and where it happened. So, no need to ask the customer. By removing the obstacle of an excess, we can create an automated claims process that looks nothing like traditional mobile device damage insurance.
As you can see, automated claims processing can transform the device insurance experience. It delivers a service that doesn’t feel like insurance. Yes, some insurers will wail about increased claims frequency due to the automated nature of the claim initiation and the lack of an excess to discourage claims. But I believe that where we can determine with certainty that there’s been a genuine accident then the products we construct should be designed to just work without complexity.
Consumers will pay a little more for something that is perceived as much more of a service than an ‘insurance’. Maybe we could call it ‘the fifth emergency service’?
EIP is an InsurTech100 company that provides cutting-edge digital insurance solutions to Telecoms, Banking and Lifestyle insurers. Our InsurTech solutions, powered by automation, are trusted by some of the world’s leading brands. Learn about EIP and our technology enables automated claims processing, amongst other great features and benefits.