As the fintech and finserv companies expand and become the face of digital India, adopting machine learning might be the best way to move ahead.
By Kunal Varma, MoneyTap
Today’s fast-moving era demands everything quick and easy. Technology and financial services are no exception.
The need for real-time, instant and 24×7 access to mobile wallets, instant credit and other banking services and products are real. Keeping up with this demand, fintech innovations have made it possible to have the luxury of seamless access to financial services.
However, this luxury has made us vulnerable to cyber crimes, online frauds and data theft. Fintech and finserv companies are realising this vulnerability and they are turning to machine learning and Artificial Intelligence for better security.
The most common frauds include card skimming, virus attacks with malware to steal user’s confidential data and phishing. Identity thefts and user’s personal data theft are a great danger too.
Every financial institution follows the below steps in fraud detection:
– Observe and analyse user’s action. – Determine if it is in line with past behaviour or there is a deviation. – Decide if it should be treated as a fraudulent activity or not.
The traditional system follows a predefined set of rules used as checkpoints for fraud prevention.
For example, the financial institution may have a rule that if a customer adds more than a certain number of credit cards to his account in a day, raise a red flag. Other warning points could be behavioural things like unusually large transactions or atypical locations.
However, with so many transactions happening in digital space each second, this system cannot keep up. It also requires human adjustment. Cybercriminals can easily circumvent around these red flags. Hence the financial organisations require machine learning as a much-advanced approach to fraud detection.
Advanced Fraud Detection System:
The distinct feature of machine learning is its capability to self-learn. As more and more data accumulate, the algorithms get better resulting in an overall increase in efficiency and accuracy in detecting fraudulent activities.
ML-based algorithms can read the subtle correlations between the user’s behaviour and the likelihood of a fraudulent action. It can read and analyse large data in seconds including images and texts.
There are two types of machine learning used for advanced fraud detection system: supervised and unsupervised. Supervised ML is fed historical data labelled as fraudulent or not-fraudulent and the algorithm then uses this data to recognise any fraudulent activity.
Unsupervised ML is just fed large data and it can recognize the anomalous behaviour or any malicious attack by learning and building the data. These two types can be used independently or in combination to create a robust fraud detection system.
Machine Learning Reduces False Positives
While detecting the possibility of fraud, the traditional system sometimes reads a normal transaction as fraud and stops it. This is called false positive. This decline is undesirable as it often results in a shift in customer loyalty. Because machine learning algorithms are more accurate, it helps to minimise the huge losses incurred by banks because of false decline or false positives.
Future machine learning based security system can also include face recognition. ML can analyse and remember the network of veins in user’s eyes. This can help minimise the possibility of misuse of user’s confidential information.
There is no doubt that machine learning is the weapon to fight increasingly sophisticated and intelligent frauds happening worldwide. As the fintech and finserv companies expand and become the face of digital India, adopting machine learning might be the best way to move ahead.
(The author is co-founder, MoneyTap. Views expressed above are his own)
For auto insurance carriers, claims account for over 70% of net premiums written. Any reductions that insurers can make to claims costs are critical to improving their combined ratio. Telematics is uniquely suited to address all the major contributors to claims expenses and help insurers achieve sustainable cost reductions. This infographic explores the growing loss ratio challenge auto insurers face today, identifies the specific ways telematics reduces claims costs, and provides an example of the impact of telematics on an insurer’s combined ratio.
As December winds down, the team at Octo North America wraps up a very successful 2017! It was a busy year for the Company overall, with numerous partnerships, multiple new products delivered, the announcement of a new IoT platform, and the acquisition of Willis Towers Watson, including its market-leading DriveAbility® solution and the DriveAbility Marketplace.
Highlights of our year include:
February: Octo joined Guidewire PartnerConnect™ as a Solution Partner and delivered a Ready for Guidewireaccelerator for Guidewire PolicyCenter® 8.0.
March: EMC Insurance Companies chose Octo as a fleet telematics partner for its commercial telematics program, Peak FleetTM.
April: During Distracted Driving Awareness Month, Octo enabled a new Distracted Driving scoring and analysis feature across its suite of in-vehicle and mobile telematics solutions.
May: Five million cars were connected to Octo’s telematics platform across the globe, a 25% increase since 2016.
June: The Company was named the Best Insurance Telematics Product or Service of the Year at TU-Automotive Detroit 2017.
July: The Company delivered an IoT insurance platform, called the Next Generation Platform, which allows for complete flexibility in the selection of sensors, analysis and output of data for all insurance and automotive services.
August: Octo partnered with Ana Seguros, part of Grupo Valore, to deliver a new fleet telematics program, signifying strong market demand and growing Octo presence in Mexico. Also, Octo announced a partnership with Agero, the largest B2B provider of roadside assistance services to automotive manufacturers and insurance providers in North America, to deliver an integrated crash management solution for carriers.
September: Octo released Vantage – formerly Glimpse plus – a cutting-edge, digitally enabled telematics service that provides a reliable way for insurers to gather accurate data on driving behavior, as well as more detailed crash detection and claims analysis. The smartphone plus smart tag solution also enables consumers to use their smartphone to monitor driving habits and become safer drivers.
October: Octo announced the acquisition of the UBI assets of Willis Towers Watson and will partner with them on insurance-related products. The acquisition closed in December.
November: North America operations surpassed the activation of three million usage-based insurance (UBI) users.
December: CAA Insurance Company launched CAA Connect for Ontario, Canada participants, a usage-based insurance program powered by Octo.
We’re excited to close out a busy year of impactful news and milestones. In North America, we’ve continued to partner with tier one insurers and helped them to extend the value of telematics beyond UBI. Crash and claims is one example – there is growing demand for the use of telematics to reduce the cost of claims by identifying and eliminating fraud, decreasing bodily injury claims, and cutting legal costs associated with contested claims.
2018 Predictions and Insurtech Expectations
As we look to 2018, we also analyze the direction of insurtech and telematics. A few of our predictions:
The addition of more sensors and smartphone capabilities that, like Vantage, deliver a superior ability to collect quality data – making the telematics offering more accurate than those based on a smartphone alone. Tag sensors are easily installed in a vehicle, pair with a user’s smartphone, and make the detection of trip events and data incredibly reliable – even if the smartphone is not in the car, improving data use and providing a better user experience.
The continued evolution of telematics services to improve crash data capabilities and optimize claims processing – showing a significant financial impact for forward-thinking insurers.
The use of telematics expanding beyond auto and transforming customer experience and insurer-to-insured relationships in other insurance verticals such as home, pet, health and on-demand insurance.
Happy Holidays and Happy New Year! We hope to see you again in 2018 for another exciting year in telematics and insurtech!
At the heart of Octo’s leading crash and claims capabilities is the crash dossier – a compendium of all relevant facts automatically compiled and provided to our insurance partners within minutes of a crash. The Octo crash dossier is a very powerful tool to help you reduce fraud, estimate damages, and accurately assign liability. In this blog post, we deconstruct the dossier into its parts so that you can understand all the helpful data that is included. You can download an example of the dossier here.
The crash dossier is populated with telematics data from the Octo Cloud, crash scene photos and driver feedback from the Octo telematics app, and policy information from the insurance carrier.
To understand driving behavior, Octo collects and analyzes vehicle data on a second-by-second basis. When a crash occurs, Octo stores even more granular data for sixty seconds prior to the crash and third seconds after a crash. This data describes the movement of the vehicle along six axes, helping us reconstruct the accident, identify points of impact, and estimate force of impact. Octo uses vehicle telematics data to reconstruct the accident and provide a visual recreation of the vehicle’s movement back to both the insurer and the insured.
Our smart crash app, available as part of Octo’s Vantage, Surround, and Fleet apps, collects driver feedback after an accident. The app allows users to report an accident directly to their insurer. Crash scene photos and driver feedback help validate the accident and provide evidence to support claims. After validating that a crash has occurred, the app prompts the driver to identify any vehicle damage and provide photos the insurer can use to validate the damage.
Telematics data, driver feedback, and policy information are combined to form a crash dossier, which can be compiled and sent to the insurer in a matter of minutes.
The crash dossier starts with basic account details so an insurer can tie the crash back to a policy.
Device identification code:
Installed on vehicle with plate:
Vehicle make and model:
Contract id number:
This is followed by a summary of high level crash data as captured and validated by Octo.
130-136 Rumford Avenue Newton, Massachusetts Middlesex County 02466 United States of America
GPS coordinates (Lat., Long.):
GPS detected speed in Mi/h:
Vehicle ignition status:
The details section includes critical crash dynamics information that insurers can use to process and adjust the claim – date, time, location, impact locations and forces.
Satellite and vector-based maps show the path of your policyholder’s vehicle 60 seconds pre-, 30 seconds post-crash, and location of impact(s). The location of impact combined with severity helps you accurately diagnose vehicle damage.
By reconstructing the crash with telematics data, you can corroborate or challenge witness and participant statements. This is critical for reducing all the various forms of fraud with the added benefit of reducing inspection requirements for routine crashes.
130-136 Rumford Avenue Newton, Massachusetts Middlesex County 02466 United States of America
GPS coordinates (Lat., Long.):
Number of impacts:
1st impact: 2°:
2nd impact: -53°
Octo provides a claims survey capability for collecting driver statements and photos. Instant first notice of loss (FNOL) allows you or your claims management service to follow up with your policyholder to capture accident and witness details at the scene while they are still fresh.
Customer can answer survey:
Number of vehicles involved:
Number of motorcycles involved:
Number of pedestrians or cyclists involved:
Number of outside witnesses:
Names of witnesses:
Name: Cheryl Pineau Phone: XXX-XXX-XXXX
Number of injured:
List of names of injured:
Peter Bretton Driver of vehicle A – whiplash
Vehicle A (Policyholder)
Driver phone number:
Vehicle A striker of:
Vehicle A struck by:
Accident dynamics of Vehicle A:
Number of passengers:
Name: Peter Bretton Phone: XXX-XXX-XXXX
List of damaged componenets:
Front Fender, Front Wheel Side Skirt
Notes on accident dynamics:
Vehicle B changed lanes, didn’t see vehicle A in turning lane and side swiped vehicle a going 65 MPH on the highway.
When a crash occurs, insurers instantly receive first notice of loss from Octo. The crash dossier is generated within minutes of a crash occurring, allowing you to reach out to your policyholder to offer assistance at a critical time. Between instant first notice of loss, the crash dossier, and near immediate communication with your policyholders, telematics allows you to kick off the claims process much faster than without telematics.
Download our whitepaper to learn more about the comprehensive opportunities and benefits of a telematics-driven claims process.
Telematics-driven usage-based insurance programs are now available in every US state. Insurers have embraced telematics as a tool to more effectively price risk. The most innovative insurers are looking beyond pricing for new ways to use telematics data. Leveraging telematics to improve the claims process is the next logical step.
Our claims experts put together this infographic to show you how you can use telematics data to improve every step of the claims process:
The relationship between insurer and insured is evolving, and telematics is driving that change. The benefit of telematics for insurers is already very clear – but what about the policyholder? The infographic below explores just a few of the most compelling benefits:
Auto insurance has one of the highest Net Promotor Scores™ of any industry, yet nearly all auto insurers struggle to engage with their policyholders in a positive and constructive way. This has contributed to a consumer mindset that the only time to think about insurance is when finding a new insurer or processing a claim. Low engagement, combined with highly price elastic customers, leads to the insurance industry having a customer retention rate of 88% – 6% below the top performing companies in any industry. Low retention rates and the high cost of new customer acquisition point to a major business challenge.
Insurers are turning to insurance telematics in order to bolster engagement over the entire policyholder lifecycle.
The Purchasing Decision
Insurers are some of the largest and most successful advertisers in the United States, spending billions of dollars each year to attract new customers and combat churn. Telematics offers insurers new, innovative ways to further improve their customer acquisition strategies through more effective segmentation and better product design.
Audience segmentation has grown in prominence over the past ten years, led by marketers across industries. These segments are usually created in much the same way a traditional rate plan would be – based on static data such as demographics that segment large swaths of different people into the same group. As data on driving behavior becomes available through telematics, insurers are able to ask – and answer – newer and more complex questions than ever before. The insights drawn from this data are a treasure trove for sales and marketing teams for use in identifying segments of consumers with differentiated values. Combining finer segmentation with traditional product marketing strategies, marketers can reach potential policyholders with higher-impact messaging that addresses their individualized needs while developing product offerings that add tangible value.
Improved segmentation also allows salespeople to direct prospects to personalized products and services they actually need, helping insurers more easily acquire new, satisfied customers. Two large segments that are immediately identifiable with telematics data are low-risk drivers who are currently paying high premiums and high-risk drivers who are currently paying low premiums. The first group are highly prized and likely very profitable as an insurer can offer large premium discounts for switching to a UBI program while still charging an adequate premium for their risk. The second group is underpriced and can be either re-priced accordingly or re-written for more appropriately rated products.
The auto insurance industry has largely lagged in offering customized products to individual buyers. Telematics presents the possibility of an insurance product completely personalized to the policyholder. Beyond improved sales and marketing, telematics-driven usage-based insurance allows insurers to create flexible and personalized products, services, and communications. Usage-based insurance programs are particularly attractive to safe drivers who are typically penalized by ‘subsidizing’ poorer performing drivers in traditional demographic-based rate plans. As telematics matures and more insurers offer UBI programs, the lack of a usage-based insurance product can lead to policyholder defection and create adverse selection as more preferred risks seek lower rates elsewhere.
Having more auto insurance products doesn’t necessarily increase profitability; having products that speak to the specific needs and values of consumers does. Telematics-driven services such as vehicle recovery, emergency calling, and distracted driving prevention add real value to consumers. In a recent usage-based insurance consumer study, 90% of millennials and 65% of non-millennials would pay at least $45 per year for these benefits. Recent direct-to-consumer telematics products have launched in the United States, attempting to capitalize on this need. While we haven’t seen many insurers charging for their telematics program, consumers’ willingness to pay for these telematics-driven services shows the value of telematics to policyholders. Between discounts for the safest drivers, and the value-added services provided to anyone with a telematics-enabled vehicle, telematics programs can be a boon for both customer acquisition and retention.
Becoming a Regular Presence
For many policyholders, the ideal time to interact with their insurer is never – as long as they are not filing a claim. How insurers engage during and after a crash is critical, but a lack of regular interaction with policyholders during their day-to-day lives is a major missed opportunity for improving customer loyalty and retention. Technology has made policyholders easier to reach, but doing so effectively can be challenging. Insurance telematics enables communication opportunities outside of an emergency that are relevant, engaging, and add real value.
Telematics helps you understand how individual policyholders drive. That same data, once interpreted, can help policyholders understand how they drive. Once it has been translated into readable and actionable information for the consumer, telematics data is the exact type of personalized and relevant communication consumers want. Polling from the CMO Council shows that 56% of companies saw higher response and engagement rates from personalized content when compared to traditional communications. Companies around the world are using telematics to provide regular updates to their drivers, including:
Weekly driving logs and reports
Personalized tips to improve driving
Risk event alerts
Green driving reports and tips
Registration, inspection, and vehicle maintenance reminders
Vehicle health notifications and warnings
Some leading insurers are going one step further and adding telematics-driven gamification to their smartphone apps. Gamification has been linked to a 29% increase in customer engagement with companies’ websites. Using telematics data, insurers like Liberty Mutual have built mobile apps that allow drivers to collect badges, see how they’re driving compared to their fellow city-dwellers, and compete to be their city’s safest driver.
With new customer acquisition costing up to seven times more than retention, improving engagement can have a major positive impact on your business. Gallup research shows a strong relationship between customer engagement and critical business outcomes, including “an average 23% premium in terms of share of wallet, profitability, revenue, and relationship growth compared with the average customer.” Regular, positive communication that has been personalized to the policyholder with telematics data is a sure-fire way to build positive relationships with policyholders.
During an Event
According to a study by J.D. Power, 83% of policyholders who have a positive claims experience during an event definitely will renew their policies, whereas only 10% who had a negative experience would renew. Clearly, an insurer’s ability to ensure a positive experience for their policyholders’ during a claim is critical to the insurer’s ability to retain that customer. Insurers can improve the experience by streamlining the claims process with telematics and providing services that add to safety, security, and peace-of-mind.
Safety and peace-of-mind are at the forefront when consumers purchase auto insurance. When policyholders feel safe, they are more satisfied with their insurance and therefore more likely to stay with their insurer. Telematics-driven services such as automated first notice of loss and triggered emergency response give policyholders peace-of-mind. Advanced telematics services can notify an insurer when an accident occurs and provide information on both the severity of the accident and the location of the vehicle, allowing the insurer to contact the policyholder and dispatch emergency services. Fast accident response could not only save a policyholder’s life, but also significantly reduce bodily injury claims.
These same services are also critical to improving the claims process. Automated first notice of loss (FNOL) allows the insurer to begin the claims process immediately, rather than waiting for the policyholder to file a claim. Octo collects data from a vehicle’s sensors and onboard computer and reconstructs the crash, providing the insurer with a crash dossier. When integrated with the insurer’s claims system, the dossier helps significantly reduce the time to claim settlement. Octo’s partners report telematics-enabled FNOL can reduce the time to settle a claim by up to 50%. According to Ernst and Young, insurers realize up to a 40% reduction in claims costs. Policyholders also realize significant benefits as their barrier to settlement is reduced significantly. Data-driven claims also tend to be more accurate so policyholders may not have to take time off of work to have their car inspected. A shorter and more accurate claims process will significantly improve customer satisfaction and increase policyholder retention.
Insurance telematics can positively impact policyholder engagement throughout the lifecycle: from acquisition through renewal. Telematics can help an insurer attract new policyholders by offering prospects differentiated products. During the life of the policy, insurers can become a daily presence in their customers’ life with regular, helpful communications. Finally, telematics streamlines accident claims processing.
We’re always looking for interesting ideas and content to share within our community.
Get in touch and send your proposal to: firstname.lastname@example.org
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