Little white lies cost car insurers $15 billion
Some drivers aren't totally truthful about how far they drive and how often, meaning they're underpaying for car insurance.
This post comes from Des Toups at partner site CarInsurance.com.
A lot of it, in fact.
Quality Planning, which validates policy information for insurers, says it has found more than $15 billion in missed revenue for 2010, nearly one-tenth of the $164 billion in auto insurance coverage written last year.
The biggest culprit was misreported mileage. Drivers either underestimated the number of miles they drove each year, or their commutes were longer or more frequent than they reported. Quality Planning said insurers would have charged $3 billion more if these driver-reported numbers had been accurate.
To an insurer, mileage is risk. That's why they often reward low-mileage drivers (the threshold varies by company, but under 7,500 miles a year is a good bet for a discount) and those who commute fewer days. Wouldn't you feel safer if you never had to take to the road at rush hour? Post continues below.
The second biggest "leakage" factor was unreported drivers (people who regularly drove a vehicle but weren't declared on the policy) at $2.7 billion in missed premiums, followed by misrepresented driver characteristics such as years of experience, age, marital status, affinity groups and student grades, at $1.9 billion.
Generally, every licensed driver in a household must be included on your auto insurance policy. And so must anyone who regularly drives the car, even people to whom you are not related. An insurer will probably pay your claim -- but you could be on the hook retroactively for the difference in premiums. Need we even say that you'll pay more going forward?
Insurers use self-reported information about your marital status, years of driving experience and student grades to help calculate a car insurance quote. Every question they ask is part of their risk-evaluation process. If Elks Lodge members are entitled to an affinity discount and you've lied about membership, you've changed a component of your premium.
The newly released report, "Auto Insurance Industry Donates $15.4 Billion," analyzed 5 million policies from multiple carriers.
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