Inaccurately priced premiums cause personal auto insurance providers millions of dollars in losses every year. The tasks involved with correctly categorizing risk and accurately pricing insurance policies are complex. However, there are a few factors that contribute to inaccurate pricing for many insurers and that can easily be verified. The following blog post explores three of these factors and outlines how insurers can accurately verify them using the Smartcar API.
Although California is the only U.S. state in which a driver’s mileage is one of the most influential rating factors, mileage is a good indicator of the number of at-fault claims a driver will file. Insurers are reluctant to include mileage as a rating factor because it is difficult to verify. As a result, underreported mileage causes insurance providers to lose on average 2.6% per insurance policy.
Smartcar allows insurers to avoid these losses. Our API enables insurance applications to easily connect to their policyholders’ vehicles and to verify their monthly mileage:
The location at which a vehicle owner’s car is regularly parked might not be one of the first things that come to mind when thinking about insurance rating factors. However, a different ZIP code can easily cause a driver’s insurance premium to decrease by 50% or more. As insurers rarely verify a vehicle’s actual garaging location, more than 10% of insurance policies end up having verifiable garaging defects. For example, policyholders might forget to update their garaging address after moving. Students often still list their parents’ home address instead of their college campus address. Some policyholders even lie about their garaging location to get a better rate. As a result, insurers lose an average of 1.4% in premium leakage per insurance policy.
To avoid this premium leakage and to prevent fraud, insurers can easily verify each policyholder’s garaging location:
Similarly to mileage and garaging locations, incorrectly reported VINs cause insurers millions of dollars in annual losses. More than 5% of policyholders report an incorrect VIN to their insurer. Many insurers don’t verify the provided information. Hence, insurers lose on average 1% on each insurance policy.
Smartcar allows insurers to quickly and easily retrieve the actual VIN from a policyholder’s vehicle and compare it with the VIN they previously reported:
By verifying their policyholders’ mileage, garaging locations, and VINs, insurers can avoid losing 5% on each and every insurance policy. But Smartcar also has additional benefits that other insurance telematics solutions might not provide:
This is why verifying a policyholder’s mileage, garaging location, and VIN is crucial to achieving accurate pricing and how insurers can do so using the Smartcar API.