Conversation AI helps car insurance customers avoid post-sale potholes

21 Aug

A barrel labelled AI pouring digital tarmac into a pothole

Conversational AI: The Next Revolution in Insurtech

Conversational AI is the current insurtech hot topic, and rightly so. I firmly believe it’s the next revolution for the insurance industry. While most of the hype focuses on reducing demand on customer support, there’s a greater opportunity to create truly value-adding experiences.

Conversational AI can build new, dialogue-based experiences that promote more informed decisions and fewer nasty surprises post-sale. This article explains why this innovation will be a game-changer for insurers. I’ll share the opportunities created through conversational AI and insights from implementing a fully conversational experience with Peppercorn, a UK-based car insurance provider.

A Quick History Lesson: Evolution of Car Insurance Buying

The Local Expert
For many years, high street brokers with physical shops across the UK were the mainstay for buying insurance. They would discuss your insurance needs and recommend plans accordingly. Trust was high, as the broker was liable if the policy failed to meet customer needs post-sale, provided the customer had been honest.
1980s: Cutting Out the Middleman
In 1985, Direct Line revolutionised the model by moving from high street brokers to direct-to-insurer via contact centres. Their mission of ‘putting the customer first by cutting out the middleman, the forms, and the jargon’ offered customers lower premiums by eliminating broker commissions, marking a shift from value to cost focus.
1990s: Contact Centres Become the Norm
Telephone sales led the way, focusing on conversions and upselling optional covers. With the internet in its infancy, consumer trust in online purchases was low, and website usability was still developing.
2000s: The Comparison Website Revolution
In 2002, Confused.com launched the UK’s first car insurance comparison website, aiming to take customers from ‘confusion to clarity’. This led to the rise of the ‘big four’ comparison sites—GoCompare, MoneySuperMarket, and Compare the Market—dominating web traffic for car insurance queries.
The Lost Art of Comparing
Comparison websites make it easy to access hundreds of insurers without repetitive form-filling. With over 20 years in the insurance industry, I can balance cover suitability and price. However, for those not familiar with insurance, the constant marketing from comparison sites promoting ‘saving on your car insurance’ shifts the focus from cover needs to price alone. This often leads to advice like ‘keep your mileage lower’ or ‘don’t mention that bump if you didn’t claim’, resulting in potential future problems due to inaccurate information.

The Risks of Non-Advised Sales

Buying insurance directly from a website without speaking to a broker is considered a ‘non-advised sale’. In this scenario, the responsibility shifts entirely to the customer to ensure they understand and provide accurate information about their needs. While this model offers convenience, it also carries significant risks. Here are some key issues:

1. Inaccurate Information: Customers might unintentionally provide incorrect information, such as underestimating annual mileage or forgetting to mention a minor accident. These inaccuracies can lead to policy voidance or denied claims, leaving the customer unprotected when they need it most. Without professional guidance, the nuances of policy requirements might be missed, increasing the risk of discrepancies.

2. Misunderstood Coverage: Without professional guidance, customers may choose policies based solely on price, overlooking critical coverage details. For example, they might not understand the difference between comprehensive and third-party insurance, or the importance of add-ons like breakdown cover. This can result in inadequate protection and unexpected out-of-pocket expenses. Many customers might not fully comprehend exclusions, limits, and terms that are crucial in a policy, leading to unpleasant surprises when they need to make a claim.

3. Compliance Issues: Insurers are required by regulation to provide all necessary information for customers to make informed decisions. However, in a non-advised sale, the burden of interpreting this information falls on the customer. This can be overwhelming and lead to misunderstandings or overlooked conditions that might impact the validity of the insurance. Customers may skip reading lengthy terms and conditions, missing out on important details that affect their coverage.

4. Emotional and Financial Stress: Discovering that your insurance doesn’t cover you as expected during a claim can be a distressing experience. It can cause significant emotional and financial strain, especially if it involves major incidents like car accidents or home damage. The aftermath of such events can be exacerbated by the realisation that the coverage one assumed to be in place is insufficient or void due to incorrect information provided during the purchase.

5. Lack of Personalisation: Without the personalised advice that brokers provide, customers might end up with generic policies that do not fully meet their specific needs. Brokers usually tailor their recommendations based on a detailed understanding of the customer’s circumstances, but this nuance is often lost in a non-advised sale. As a result, customers might miss out on better-suited policy options that could offer more comprehensive protection or better value for their unique situation.

How Conversational AI Shakes Things Up

Traditional websites aim to move users from point A to B quickly, often bypassing essential information. In contrast, a conversational AI-driven experience allows users to interact and control the direction of their journey. This continuous focus helps customers ask questions about cover, navigate through policy details, and get immediate answers, enhancing their understanding and satisfaction.

Conversational AI offers a solution to mitigate these risks by providing real-time, personalised assistance throughout the insurance buying process. Here’s how it helps:

Interactive Guidance: Conversational AI can guide customers through the application process, asking clarifying questions and ensuring all information is accurate and complete. This reduces the risk of inaccuracies and ensures the customer fully understands what they are purchasing.
Educational Interactions: It can explain policy details in simple terms, helping customers understand the coverage they are selecting and why it’s important. This educational aspect ensures that customers are aware of key policy features, exclusions, and terms, leading to more informed decisions.
Regulatory Compliance: By delivering necessary information in a conversational format, AI ensures customers receive and comprehend all regulatory disclosures and important details, thus maintaining compliance while enhancing understanding. This way, customers are less likely to miss crucial information hidden in dense legal jargon.
Reduced Emotional and Financial Stress: By ensuring accurate information and proper understanding of the policy, conversational AI helps prevent scenarios where customers face unexpected denials of claims. This proactive approach reduces potential emotional and financial stress by ensuring customers are adequately covered when they need it most.
Personalised Recommendations: AI can provide personalised policy recommendations based on individual customer profiles and needs, similar to a human broker. This ensures that customers receive tailored advice, enhancing the suitability and value of their insurance coverage.

Designing Experiences That Promote Informed Decisions

Conversational AI promotes greater attention and comprehension of important information. This informed decision-making leads to lower complaint volumes, fewer post-sale cancellations, and less demand for post-sale underwriting reviews.

Customers accept and understand fully conversational experiences. At Peppercorn, we’re enhancing these interactions with proactive ‘micro-conversations’. These short, targeted exchanges can inform, warn, reassure, and answer customer queries, creating hyper-personalised experiences and better outcomes. By calling out scenarios or behaviours that typically lead to poor after-sale experiences, we ensure customers fully understand what they’re buying.

Conclusion

The transformative power of conversational AI in the insurance industry is undeniable. Beyond efficiency gains, this innovation fosters meaningful, user-driven interactions. Insurers can build stronger connections with customers, promote informed decision-making, and deliver a more satisfying end-to-end experience. As we navigate the evolving AI landscape, conversational AI represents a significant paradigm shift towards creating value-adding customer experiences.