A recent industry study by Verisk Analytics shows that auto insurance premiums should be higher for some people than they currently are. When auto insurance companies engage in the process of determining whether to renew or offer coverage, they look at a broader range of information from potential clients in the market for purchasing car insurance. However, the data that they collect is so full of missing information that auto insurance companies may be losing up to 14% of the annual premiums they collect every year. If you’re in the market for purchasing car insurance, you may be shopping around due to a rate hike after a car accident.
While that seems like a small number, this leakage contributes up to $29 billion annually. Insurance fraud is an issue currently facing Congress since Senate subcommittees are currently meeting to discuss the subject. Insurance companies argue that the lack of information means they can’t charge enough information for those drivers who strike other cars or damage their own vehicles. In previous years, car accidents and the amount that insurance companies paid for them were on the decline. In the past, there was a greater tolerance for these informational gaps, however, accident rates today are increasing significantly and even fender benders are becoming more expensive as cars are more costly to begin with.
There is also a $10 billion problem in the industry regarding unrecognized drivers or those teenagers who reach driving age but are not added to the policy until it renews the following year. Furthermore, the millennials who come home after college and drive the family car are another source of uncaptured premium that the insurance industry has its eye on. Obtaining accurate data is the only way for them to put together meaningful insurance policies that appropriately capture risk. If you have recently been involved in an accident and are now purchasing car insurance, it is important to report this to your insurance company.