September 11, 2019

How your insurance company can avoid underreported mileage

Charlotte Kosche

Sr. Content Writer

Underreported mileage causes the auto insurance industry billions of dollars in losses every year. But what exactly is underreported mileage, and how can insurance businesses avoid it?

What is underreported mileage?

Underreported mileage is a form of soft fraud. It occurs when policyholder report a certain number of miles driven, while they actually drove more than the reported amount.

Unfortunately, this underreporting of mileage happens quite frequently. Most insurance companies allow policyholders to self-report their annual mileage, asking policyholders how much their car was driven that year. Those insurance providers don’t have a way of verifying whether the driver’s answer aligns with the vehicle's actual odometer reading. Of course, this common practice invites policyholders to give rough estimates rather than accurate statements, or to even lie about their mileage information.

Why is it an issue?

Underreported mileage poses a huge problem to almost all insurance businesses. People who drive more are at bigger risk of getting into accidents. When policyholders lie about how much they drive, insurance providers will work with erroneous data and inaccurately calculate risk. The result is a large amount of premium leakage for insurance companies every single year.

More than half of drivers underreport their annual mileage to insurance companies. A quarter of them understate their mileage by 6,000 miles or more, according to a study by the California Department of Insurance. Clearly, this is not a small issue. Quite the contrary, underreported mileage causes the insurance industry to lose billions of dollars every year. Finding a solution is important and long overdue.

How can I avoid it?

The path to avoiding underreported miles is simple: Use a car’s actual odometer reading instead of relying on self-reporting and other tamper-prone solutions. Smartcar provides a mileage verification solution that lets insurance companies access their policyholders’ actual odometer readings. Here’s how it works:

Using our API technology, insurance businesses can let policyholders link their cars to an insurance application. The app can then regularly read mileage information from the policyholder’s car. This pure software solution brings multiple benefits compared to self-reported mileage and hardware alternatives:

No self-reporting

With Smartcar’s solution, insurance providers can easily and automatically read a policyholder’s odometer every year, every month, or however often is necessary. Policyholders won’t have to look up how much they drove, and they won’t be able to rig their mileage information in any way. Insurance companies will never have to deal with soft fraud or tamper again.


Smartcar’s technology communicates directly with 3G and 4G telematics modems that are built into vehicles. It allows insurance apps to access a car’s true odometer reading, eliminating all forms of inaccuracy and all risks of failure. Using this reliable information, insurance businesses can finally achieve correct pricing and underwriting.

No dependency on aftermarket hardware or smartphones

As self-reported mileage is becoming less and less popular, alternative solutions have entered the market. Some insurance providers ask their policyholders to install OBD-II dongles or other aftermarket hardware in their vehicles in order to automatically read and report mileage. The use of a policyholder’s smartphone for the same purpose is another prominent solution.

Smartcar’s pure software product is entirely different from both of these methods. First, both OBD dongles and smartphones are inaccurate when reporting mileage, as they merely estimate the number of miles driven on the basis of location and trip data. Neither aftermarket hardware nor phones are able to access a vehicle’s true odometer reading. Second, policyholders can still commit tamper by unplugging OBD devices and turning off their phones. Third, both solutions are prone to unintentional underreporting, namely when a hardware device gets knocked out of place and when a policyholder’s phone battery dies from constantly reporting its location in the background.

This is why underreported mileage poses a big problem to auto insurance companies and how Smartcar’s mileage verification solution alleviates the problem. If you have any questions about our product or would like to request a demo, please don’t hesitate to reach out to us. We’re happy to help!

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