Ghost Buster : Still-Video Helps Insurers Get Car Images on Record
Along with tons of pollution, the cars on the region’s freeways generate a mountain of paperwork for insurance companies like the Automobile Club of Southern California.
Fortunately, technology spawned by the videocassette recorder has helped the Auto Club’s data-processing division in Costa Mesa steer away from the latest potential paperwork pileup.
A new state law that went into effect in May requires the company to store voluminous photo records. The law, a measure aimed at stopping the filing of false claims on “ghost vehicles” that don’t exist, requires insurers to inspect each car and store at least three color pictures of every insured vehicle.
“The law pushed us a little harder to find a solution,” said Wayne Merrick, a systems-processing specialist at the company’s Costa Mesa office. “We found it in still-video.”
The company, which insures more than 600,000 vehicle and property policyholders in the state, complied with the law using so-called still-video cameras. The cameras, which are based on the same technology as VCRs, can capture images on diskettes, allowing the company to forgo photographic film development costs and store records directly on computer workstations.
Clark Murray, Auto Club director of information services in Costa Mesa, said the insurance company expects to save more than $700,000 a year, mainly in bypassing the process of developing and printing film. By comparison, this project has a one-time cost of about $500,000.
“The brute force solution would be to buy a lot of regular cameras and do a lot of film processing,” Murray said. “This allows us to do it in a much more cost-effective way.”
The still-video cameras, a video camera-like gadget that takes freeze-frame images on video film, capture as many as 50 frames of pictures on 2-inch-square diskettes that function much like personal computer disks.
The still-video pictures are incorporated into the company’s “image-processing” system, or computerized record storage system, which the insurance company installed several years ago. The pictures help cut fraud in that they at least verify that the insured vehicle exists and its vehicle identification code is correct.
It takes a lot of technology to address the scope of the company’s storage problem. The Auto Club must store 36,000 new pages of documents daily, in addition to the 7 million documents that the company already has on file.
Last year, things got more complicated. The state Legislature passed the photo inspection law as a way to combat insurance fraud. The state Department of Insurance estimated that 15% to 30% of the $860 million in losses caused by fraud each year could be attributed to owners filing false claims on so-called “ghost vehicles.”
Since May 1, the company’s policy underwriters at 80 branch offices have used still-video to record images of newly insured cars and their vehicle identification numbers. The company has been taking 5,000 still-video photos a day, far more than it could process using photographic film.
The quality of the image can be checked by viewing the image with a hand-held monitor, and the diskettes can be “read” by VCR-like machines that can be used to make direct prints. The pictures are blurry, but identification numbers show up clearly in the reproductions.
Once on diskette, the images of the cars can be scanned into IBM personal computers. From there, they can be transferred to the company’s mainframe computer system or to archives stored on optical disks.
Underwriters in the company’s Los Angeles headquarters or in branch offices can recall the images on a computer monitor if they need to reconcile their records with statements by customers.
After the image is transferred into permanent storage, a diskette can be erased and used again. Thus, a single diskette can replace hundreds of rolls of 35-millimeter or Polaroid film.
While it saves time in the normal photographic process, the new system hasn’t resulted in layoffs, Merrick said. The company employs 1,300 people in its Costa Mesa data-processing office, where warehouses of paper are still being converted to computer storage.
In the future, Murray said the company plans to expand its use of electronic photos so that they can be used in verifying damage claims. The Auto Club will also use the technology in homeowner, jewelry, boat and other property insurance.
The quality of the pictures required for claims work may call for the superior technology offered by digital cameras, which store the images in computerized data format but cost about $20,000 each, compared to about $200 for the still-video cameras.
Third-party inspection companies, which perform inspections for insurers and take their own pictures, were one option available to the Auto Club, but Murray decided that using in-house technology would be more cost-effective.
Mary Crystal, spokeswoman for the Western Insurance Information Service, an insurance industry association, said it is too soon to tell whether the new law is helping to reduce fraud in Southern California.
But, if anything, the still-video technology enables the company to meet the requirements of the law.
“The courts consider this the best available evidence,” Murray said.
New Policy on Auto Insurance
Insurance fraud is big business, and the California Legislature aims to combat the problem by requiring insurance companies to inspect and photograph vehicles before a new policy can be issued. The new auto inspection law, which took effect May 1, was designed to prevent the submission of claims for cars that don’t exist. Consumers are expected to benefit: Reduced fraud can eventually mean reduced insurance rates.
WHAT THE LAW SAYS
* Insurance companies and their agents must inspect private passenger vehicles before a policy covering physical damage can be issued.
* Insurers can require periodic reinspections, but not more often than once a year.
* The inspection must be recorded on a form adopted by the insurance commissioner and must include three color photographs, one of which shows a close-up of the Environmental Protection Agency sticker and vehicle identification number.
* Additional photographs may be taken.
* Insurers must bear the cost of inspections.
WHAT IT MEANS TO CONSUMERS
* Unlike smog tests, there is no out-of-pocket expense to them.
* Your insurance company is required by law to notify consumers if their cars must be inspected.
* Inspections are mandatory for most vehicles when obtaining a new insurance policy with collision and comprehensive; the inspection must be done before coverage is issued.
* In many cases, a car added to an existing policy requires an inspection; if a car does require inspection, its owner has seven days to obtain one.
* New vehicles purchased or leased from a dealer do not have to be inspected.
* Vehicles built in 1985 and earlier are not affected by the new law.
Source: Automobile Club of Southern California; Western Insurance Information Service
Researched by DALLAS M. JACKSON / Los Angeles Times
