You probably know the oil industry’s “fracking” story: everyone knew there were huge reserves of oil tightly locked in shale rock. They ignored them because the cost of producing that oil exceeded its value. Until an innovator paired new technology with techniques that radically reduced the unit cost of extraction, inventing “fracking”. The rest is history.
Auto insurance rate manipulation and fraud has a lot in common with tight shale oil. Carriers have long known that there is significant fraud in their books – it has traditionally been estimated at 15 to 20 percent. Obviously, the carrier who could figure out how to eliminate this cost could gain a huge edge. But almost all of this fraud is “small ticket” and until now it hasn’t been economical to pursue most of it. But like with fracking, someone has paired advanced technologies with new techniques that radically lower the unit cost of defeating small ticket frauds.
Geico has a reputation for being a technology laggard in the Personal Lines
P&C industry. They've acknowledged this. But Progressive, their longtime rival,
is the industry technology leader. So much so that they avoided the massive
post-covid meltdown that the rest of the industry experienced. So how is Geico
going to catch up? By implementing the same package software core systems that
the rest of the industry have. Or by building tools that enable much more
granular and event driven risk selection throughout the policy lifecycle? Which
is where the money is and is something core systems can't solve.
A multi-pronged approach addressing underwriting, renewal, and claim management practices is crucial. By proactively managing risk and fostering transparency, insurers can safeguard their systems against exploitation, ensuring fairness for legitimate claimants while protecting themselves from unnecessary losses. Vigilance and a commitment to comprehensive assessment are key to navigating the complexities of risk.
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