Modernizing Vehicle Claims Through Telematics
The CEO of 2024 InsurPitch Dublin-winning insurtech Xtract shares insights on leveraging telematics to accelerate and optimize claims processing while boosting customer satisfaction and loyalty.
Season 6, Episode 11 | Michael Flanagan – Xtract
Speaker 1:
It is time for InsurTalk with insurance industry tech geek and Guidewire Chief Evangelist, Laura Drabik. In this podcast series, we don’t just talk about innovative ideas in P&C Insurance, we talk with industry trailblazers about the big ideas they made happen and how they did it. If you’re looking for insights on the trends and technologies reshaping the industry, an all-new InsurTalk starts now.
Speaker 2:
Welcome to InsurTalk. My name is Laura Drabik, and I’m the Chief Evangelist at Guidewire. In this episode, I have the privilege of interviewing Michael Flanagan, CEO of Xtract, a Dublin, Ireland-based Insurtech and winner of Guidewire’s Insure Pitch Dublin competition in 2024. In 2017, Michael founded Xtract after discovering that the telematics data used for usage-based insurance in commercial fleets wasn’t making it into the claims process. So he set out to help change that, and that’s the focus of our conversation today. Strategies for harnessing telemetric data from connected vehicles to streamline, simplify, and de-stress the claims process for everyone involved.
Hello, Michael, welcome to InsurTalk.
Speaker 3:
Hey Laura, thanks for having me.
Speaker 2:
Well, it’s a pleasure to have you here. Most of our listeners, they’re familiar with telematics in the context of usage-based Peugeot drive auto insurance that incentivizes safer driving in exchange for reduced premiums. But data captured through telematics-based smartphone apps in-vehicle systems or plug-in dongles can also deliver, I think, enormous value to carriers and policyholders when accidents do occur. Let’s take the first notice of loss process. Pertinent telematics data can be instantly and automatically relayed to the carrier. The technology can also summon a tow truck or first responders or even notify the policyholder spouse about the accident. Michael, how else can telematics data at first notice of loss benefit policyholders and claims handlers?
Speaker 3:
Yeah, I think the data that’s available from the connected vehicle at first notice of loss is really powerful. Things like exactly where the incident happened, the date and time the incident happened, whether the vehicle needs to be repaired or not, things like understanding the severity of the accident, the panels that are damaged, all these data points lead to making actual decisions in the claim file. And, of course, when you’re able to proactively control whether it’s a fault or non-fault claim, whether the vehicle needs to be repaired or replaced, that ultimately will feed into a much better claims process and a much better customer experience. So it’s really powerful when that information is there at FNOL to really drive the decision-making of the claim.
Speaker 2:
As someone who many years ago had to work between different parties and determine whether the vehicle was a total loss or repairable, et cetera, this type of data would’ve been essential for reducing, I think, the claims process and also delivering better service to the claimant. I’m just wondering if you’re seeing that.
Speaker 3:
No question about it. When you know the severity of the accident, you know the vehicle is involved, you know the panels that are damaged. Now straight away, there is solutions out there that will automatically tell you if the vehicle needs to be repaired or replaced without even speaking to an agent, without even have to call in to report the accident. In your situation or imagine if you’re dialing into the carrier to report that claim and all of a sudden they’re able to tell you that your vehicle is a total loss and it’s going to be brought straight to salvage, you’re going to be written a check to get a new vehicle or you’re going to be given a rental car in the meantime. All them data points are there. It’s just a matter of a piecing it together three feet into a cohesive claims process.
Speaker 2:
Yeah, that makes sense. As someone who had, again, to deal with this, it would take two to three days to determine if a vehicle was a total loss because we had to get an appraiser out to see this, and then you incur salvage storage costs associated to that. And then like you said, the poor claimant is just waiting to understand what’s going to happen to their vehicle. So really well put. When integrated with the analytics built into a modern insurance platform like Guidewire’s, of course, we believe that telematics and other connected vehicle data can also enable predictive damage assessment, just like we discussed to triage, repair, or establish total loss, accelerating the entire claims process as you mentioned as well, Michael. What types of connected vehicle data is most valuable in achieving this, and why is it the most valuable?
Speaker 3:
I’d probably look at this in three buckets. You’ve got your GPS data, which shows you exactly where it happened, and then you’ve got your accelerometer data. This shows you the severity of the accident, what the driver was doing leading up to the accident, and you get a lot of great insights from that information. But then there’s the sensor information directly from the vehicle itself. Did the airbags go off? Was there seat belts activated? Was there any other sensors within the vehicle that were important? When you start looking at all of these, they almost blend into understanding if a vehicle, for example, is repairable or total loss. The G-Force of the accident will let you understand what panels are damaged. Then, of course, if you’ve got an airbag that went off, the costs that are incurred with that as well. So it’s really leveraging all these different data points to really then automate that decision. And, Laura, you mentioned there three days to make that decision. That decision today is available in seconds.
Speaker 2:
Yeah, thanks for highlighting that improvement. So digital first notice of loss capabilities and connected claims data is a competitive issue at a time when apps and digital claims processes are really driving higher customer satisfaction levels. And according to the 2024 JD Power Auto Claims Satisfaction Survey, digital claims processes contributed to a five-day reduction in average repair times this past year, which in turn then boosted, of course, claim satisfaction. According to this survey, this is particularly true with millennials and Gen Z consumers. Together, these cohorts make up nearly 43% of the population. So adopting digital claims processes is really paramount to carriers moving forward. With that in mind, Michael, what specific capability should carriers prioritize when it comes to leveraging connected vehicle data in claims processes, let’s say, over the next two to three years?
Speaker 3:
Carriers need to be ingesting data from that connected vehicle into the claims process first. That’s the first challenge. So building a strategy around how do we interact either via partners or direct with the OEMs themselves, with the aftermarket telematics providers to make sure that that data when is available we are leveraging it in our FNOL process. The second part then is it’s one thing getting the data, what do you do with it? How are you deriving insights from them ones and zeros that’s coming in this raw format? How are you then making actionable insights so you’re making the right decisions to ultimately give them a much better claims experience? So get the data into the FNOL process and then understand how you really leverage that to then drive the right decision in the journey.
Speaker 2:
So let’s keep on this train of thought. According to JD Power, even as millennials and Gen Z embrace digital claims reporting and processes, Gen X and Boomers continue to be hesitant about them. Michael, what are some strategies for making the use of telemetric data more compelling and approachable for Gen X and Boomers who will at least over the near term, continue to rank among the most profitable consumer cohorts?
Speaker 3:
If we want telematics to really be taken off at scale, the customer proposition needs to change. You mentioned the pay as you drive programs. You’ve obviously got your young driver programs where they’re going to have a box in their car and track what they’re doing, and that’s great for small segments, but my view is that it’s not about tracking what the customer is doing all the time. The most valuable bit of data in my view is when that claim happens. And if you could change your customer proposition to a point where it’s we’re not going to collect data on you, we’re not going to track what you’re doing or where you’re going, but when there’s a claim to be reported, we have consent to go and retrieve that 20 seconds of data to help manage that claim more effectively for a better customer experience, making the right decisions, determining fault and unfault quicker.
When you switch the proposition around where it’s not there as big brother to track you, it’s there to protect you when something goes wrong, that’s where telematics within insurance will shift. People will be looking at more as it’s there to support them as opposed to tracking what they’re doing all the time, which is why this has not been adopted at scale.
Speaker 2:
Awesome. Such great information. When we come back after this short break, we’ll continue our conversation with Michael Flanagan, CEO of Dublin, Ireland-based Xtract. So don’t touch that dial.
Speaker 1:
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Speaker 2:
Welcome back to InsurTalk. This is Laura Drabik, and I’m talking with Michael Flanagan, CEO of Dublin, Ireland-based Xtract about modernizing the claims experience through connected vehicle data. Before the break, Michael, we were discussing connected telematics based vehicle data and its role in the digital claims process. Today, there’s this odd dichotomy. Digital claims processes contributed to high satisfaction levels for policy holders who use it, but today only 13% of all auto policy holders do so. On the policy side, subscriptions to telematics enabled usage-based insurance doubled to 17% penetration between 2016 and 2021, but has seen little growth since. A key driver of consumer hesitance appears to be exactly what you said, concerns over privacy. How should privacy and security concerns be factored into strategies for leveraging connected vehicle data and claims?
Speaker 3:
Let’s start with commercial lines. The fleet or the customer is agreeing at policy inception that they’re willing to share their telematics data with their carrier for claims processing. The carrier doesn’t need to know everything about that fleet and what their drivers are doing, but they’re getting consent to share claims data when a claim gets reported, and we’ve seen this. We have customers today where the carrier has baked it into the T’s and C’s of their policy that they’re only using the data for claims processing
In personal lines, there’s two ways I see this unfolding. One is where customer at policy inception is agreeing to share their data with their carrier to be used when something goes wrong when a claim happens. From day one, they’re accepting that as part of policy. But I think that the newer approach could be that the consent only matters when a claim happens. So when something goes wrong, they’re giving consent in the FNOL process to say, we’ve identified that there’s connected vehicle data in your vehicle. Can we use that to help process your claim? And customer very clearly understands exactly what’s being shared. They give their consent, and then that’s the green light basically to go and retrieve that information from the vehicle to then use out in the claims process.
So I think there’s a few ways it can happen. The last way I’ve told you about is a newer way that we’re seeing it happen with the carriers, and I think that will be more prevalent as we go forward in terms of that consent process where it only matters when it’s needed as opposed to the consent is there all the time.
Speaker 2:
Yeah, that would certainly, I think, help to reduce, I guess the apprehension around providing data. I’m not certain I would even want my data being shared a hundred percent of the time, but you’re right. You’re pivoting the messaging at a need, which is first notice of loss or an accident as opposed to just a constant monitoring to maybe affect pricing upwards, maybe even downwards hopefully. But I really like your pivot. Have you seen this happen in the market? Have you seen carriers pivot the way that you’ve just mentioned?
Speaker 3:
Certainly, yeah. So on commercial lines, we’ve seen it happen almost four years ago where the carrier originally was collecting telematics data, exactly like you said, heard on the top from day one. They weren’t doing anything with it. It wasn’t useful. Unless you’re doing something with the data, then you don’t want to be having a feed of information. So they stopped it, and now what they pivoted to is when you sign up to a policy, they get consent to share that telematics data with the carrier when a claim happens. That’s been really successful. We’ve been working with a carrier in the US across their fleet customers doing that exact model where it only happens when that claim is reported.
In personal lines, we are seeing this with personal lines carriers in Europe, also with OEMs directly where the consent is happening at that moment of claim. So the data is running in the background, the OEM is capturing that information, but it’s only when that FNOL happens that they’re giving consent to use that information in the claims process. That’s still very early, but this to me is where the industry is going to go in terms of, you said exactly right, don’t turn on the tap all the time. People don’t want that. But, hey, if something goes wrong, I’m going to give my data because I want to make sure I’m getting the right outcomes, and I think that will change people’s perspective of sharing information.
Speaker 2:
Claims organizations connected vehicle data can also aid in assessing faults and lowering liability costs. As you know, this is really important in commercial lines. A study from RAND Corporation has found that increased litigation stemming from commercial collision claims has seen plaintiff win rates increase as much as 64% over the last decade, and jury awards grow 20% annually due to social inflation. But studies have also shown that connected vehicle inputs like those from dash cams lead to the driver of a commercial vehicle being exonerated roughly 63% of the time. So, Michael, what are some other data points that can be used to reduce liability in commercial lines?
Speaker 3:
Video footage is so powerful, no question about it, but not every fleet wants to incur the cost associated with fitting out cameras. So even the accelerometer sensor that’s in a device that can track exactly what the vehicle is doing leading up to the accident, whether they were cornering, lane change, braking, acceleration, really important data points to understand what our driver was doing. Especially in the US when you’ve got contributory negligence across several states where being able to prove that your driver did everything in their power to avoid the accident could move a false claim from 100% to a 50 or a 70/30, which has huge implications to a fleet, and you get that just purely based on what the driver was doing leading up to that accident.
That to me is like bread and butter for telematics that should be used in the claims process to really shed a light on what our driver was doing. Were they within the speed limit? Were they in their lane? How do they approach the accidents? Did they avoid it? These data points are really critical to help tell the story, and then you start laying in driver statements and everything else, and all of a sudden you’re building out a full picture to make sure that the fleet is defending themselves the best they possibly can.
Speaker 2:
Excellent. Thanks, Michael. On the other side of this break, we’ll continue the conversation, so stay tuned.
Speaker 1:
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Speaker 2:
Welcome back. This is Insurtalk with Laura Drabik, and we’re talking with Michael Flanagan, CEO of Dublin, Ireland-based Xtract about modernizing the claims experience through connective vehicle data. We’ve been discussing some of the profound benefits of telematics data in both personal and commercial lines auto, but, Michael, what are the most common challenges insurers encountered when attempting to leverage connected vehicle data in claims processes, and what are the best practices for overcoming them?
Speaker 3:
So I think back to the early days of Xtract, and one of the biggest challenges that we came across on the carrier side was the word false positives, where events were happening on the telematics side and the insurance carriers didn’t know whether they were real or not, they didn’t want to outbound to the customer, and that was the apprehension of really adopting telematics when it came to claims. And what we have seen over the last number of years and problems that we’ve tackled is, well, first of all, when an FNOL is reported, you’ve got confirmation that something has happened, so you’re only retrieving the data when it’s needed to validate that something has gone wrong and use that insight. But also the detection rate for false positives have massively increased based on other factors because now we know the vehicle itself has so many rich sensors, we’re not relying anymore purely on an accelerometer to determine G-Force.
We’re looking at things like the airbag sensors. We’re looking at things like the vehicle impact sensors themselves to increase the confidence level. And then when you layer in things like dash cams who have their own events, the real way to tackle the solution is to look at every data point in that vehicle to feed into a confidence score to validate that something has happened, and then present insights carrier. So we’re seeing that that shift has happened where the carriers are more open, the trust levels are higher to really tap into telematics data claims than what we’ve seen in the earlier days.
Speaker 2:
Today, nearly 90% of all new vehicles have built in connected vehicle technologies, but we’re just at the earliest stages of the connected vehicle revolution. In this podcast series, Michael, we talk a lot about the shift from personal lines to existing new commercial lines opportunities for auto insurers. What do you think the next two to three years holds for the use of connected vehicle data in beginning to transform the overall P&C insurance landscape, particularly in claims management?
Speaker 3:
So I think back a number of years ago when the OEMs for the first time realized that vehicles are connected and now we need to get data from our vehicles and start creating use cases around it. And in the earlier days, the OEMs, the vehicle manufacturers, they were working with data exchanges to enable them to basically get the data from their vehicles. It started first in personal lines, but while they were able to get the data from the vehicle, the use cases weren’t there. They weren’t mature enough to understand how would we monetize this data? We spent all this money getting the data out of the vehicle, but in the personal lines use case, how are we going to sell it? So what they did was they then shifted to commercial lines. Well, commercial fleet, they’ll buy the data because they already buy into telematics programs.
But then the challenge with that pivot was the quality of the data from the OEM just wasn’t the same level as an aftermarket device so you’re paying more for poor quality data. What we’re now seeing though is a full 360 shift where it’s coming back around to personal lines because the use cases are there. There’s more understanding as to what the value of the data is. And what we’re going to see, Laura, in my opinion, over the next two to three years really, is that telematics data now will not be on a per vehicle per month subscription basis, it’s going to be more transactional. There will be data coming from a vehicle that somebody wants to purchase P&C, for example, that will make sure that everybody wins in the equation. And I think over next few years, the industry is going to see that telematics is going to be really leveraged within claims within that FNOL process. And it’s a great time to be involved in claims and connected vehicle data.
Speaker 2:
So, Michael, you were the winner of our Dublin InsurTech Vanguard’s pitch event, rightfully so. Your value prop is very relevant and also your customer traction. Maybe you could share what you learned from the InsurTech Vanguard’s program that would help early Insurtechs.
Speaker 3:
Very early on in our journey, we knew that we had to partner with the right partners in order for Xtract to really succeed. And when the opportunity came around to be involved in the Guidewire Vanguard program, that was the perfect starting point for us in the Guidewire journey. So for any Insurtechs out there that have a complementary solution to Guidewire, I would absolutely make sure that you look into the program and get involved because Guidewire is a massive company. If you can align what you have, make it complementary to Guidewire and show value to their customers, the Vanguard is really the stepping stone into the Guidewire ecosystem and really enables you to get visibility of your solution to Guidewire’s global customer base. So absolutely would recommend it for anybody that is looking to go down that path.
Speaker 2:
Michael, thank you so much for your time today and for your incredible insights. You’ve shown us that success in P&C innovation isn’t just about ideas, it’s about making ideas happen.
Speaker 3:
Thanks a million, Laura, I really appreciate you having me on.
Speaker 1:
Tune in next time for an all new episode of InsurTalk with Laura Drabik, brought to you by Guidewire, the platform P&C insurers trust to engage, innovate, and grow efficiently. For more information, visit Guidewire.com.