Unreported life changes and little white lies have a big financial impact in the auto insurance industry – and in the end the everyday consumer.
Rate evasion, the term used to describe the inaccuracies on auto insurance policies – whether intentional or accidental – that result in lower than they should be premiums for the policyholder costs the insurance industry $16 billion a year, according to Bob U’Ren, senior vice president of San Francisco-based Quality Planning.
“They have an impact certainly,” U’Ren said.
Quality Planning works with insurance companies to identify areas of significant rating errors through the use of sophisticated database management, statistical analysis and modeling, customized survey design and highly targeted customer interaction.
U’Ren said for some consumers the inaccuracies are accidental. A new driver is in the household, the use of the vehicle has changed or most commonly, the mileage driven each year has changed and the insurer was not notified of the changes.
“The most common is misstatement of annual mileage or how far people drive each year, how far they commute. Those are often mistaken by substantial amounts,” U’Ren said.
Of those consumers who do report their life changes many withhold the true impact those changes may have, according to a May 2010 study by Quality Planning. For example, when filing a change of address, 23.6 percent claimed this would not change their annual miles driven and 4.4 percent claimed this would not change their commute distance.
