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AI-driven data transforms car insurance risk, pricing & claims

Wed, 2nd Jul 2025

Developments in Artificial Intelligence are influencing operations across the car insurance sector, resulting in a shift towards smarter, data-driven practices.

AI is now increasingly being applied at various stages of the insurance process, from analysing data sourced from connected vehicles to delivering automated claims handling and real-time identification of fraud. These changes are being seen in multiple aspects of the value chain, assisting insurers in managing risk, personalising offerings, and providing proactive services based on real-world data.

One notable area of change involves risk assessment and pricing. Insurers are now able to utilise AI to perform underwriting that considers individual driving behaviour, rather than relying solely on generic demographic information. This allows for more tailored risk analysis, which can lead to personalised pricing structures for customers.

The claims management process is another field witnessing improvements through AI integration. Automated systems can now handle claims at enhanced speed and accuracy, which contributes to cost reduction and an improved experience for policyholders.

Fraud detection has also benefitted from smarter digital tools. AI-driven solutions are able to detect unusual patterns and flag potentially fraudulent activity more efficiently, thereby helping insurers to protect themselves and their customers from unnecessary losses.

Customer engagement is seeing enhancement as well, with the use of real-time feedback and personalised insights that provide greater transparency for policyholders. Predictive analytics enable insurers to identify risky behaviour and intervene proactively to help drivers avoid accidents.

The transition to electric vehicles (EVs) is presenting new challenges for insurers, given the different usage patterns and risk profiles compared with traditional internal-combustion vehicles. AI Applications are assisting companies adapt to these developments by analysing data specific to EV use, helping define appropriate products and services for this growing sector.

Central to all these innovations is access to relevant data. By using real-time information from connected cars, insurers are able to take full advantage of AI-driven analytical tools. Trakm8, a provider of connected insurance services, highlights the utility of connected car data in creating a foundation for pricing, risk management, and customer engagement strategies empowered by AI. Their offerings focus on supplying insurers with rich vehicular data encompassing behavioural analytics, vehicle health, and accurate mileage tracking.

Usage-based insurance policies, informed by the real driving behaviours and patterns of customers, are being enabled by these new data solutions. The outcome is a range of insurance products that respond more closely to the digital preferences and expectations of today's drivers.

As insurers come under increasing pressure to introduce cost efficiencies, adapt to changing customer expectations, and keep pace with rapid technological advancements, AI is being recognised as a key driver of change. Companies such as Trakm8 are supplying the tools needed for the transition to more dynamic and data-informed insurance models.

"AI is no longer a future trend in the insurance industry. It's helping insurers move from reactive models to proactive and predictive ones that benefit both the insurer and the customer. At Trakm8, we're supporting this shift by combining connected vehicle insights with advanced AI analytics to help insurers make faster, smarter, and fairer decisions."

This evolving landscape is likely to produce ongoing changes as insurers explore and adopt additional AI-driven tools and connected data platforms to respond to the needs of both the market and their customers.

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