Astonishingly the $16.2 billion figure is 10 percent of the “$163billion revenue recognized by personal auto insurance premiums industry wide.” That seems a ridiculous amount considering all insurers have to do is be more diligent and proactive about calculating their premiums.
The founder and president of QPC commented, “For the average auto insurer, each percent of rating error loss translates into a 20 percent reduction in profitability. An insurer that reins in these losses through stringent data integrity measures can increase profits significantly.”
The QPC report is based on “premium audit reviews of more than 18 million private passenger auto policies from 20 major carriers. The report shows how different categories of rating errors contribute to overall premium rating error, and distinguishes between vehicle rating errors (mileage, usage, type of vehicle and location) and driver rating errors, driving experience and driving record).”
Some of the ways auto insurers are missing out on premiums include “premium leakage” or when “premium revenue is lost because of misrepresentation of facts, lifestyle changes or outright fraud by policyholders.” Another is “vehicle-garaging errors where young drivers keep their vehicles registered at their parents’ homes long after they have moved to large cities.”
Comment Preview