According to an error report published by Quality Planning, an estimated $15.4 billion in revenue was missed by the private passenger auto insurance industry in 2010 as a result of misinformation with policyholders.
Quality Planning is an organization that provides data validation of policyholders for auto insurance companies. It produces its premium rating error report on an annual basis, quantifying the discrepancies and errors that can lead to the undercharging of policyholders by their auto insurance companies.
Highlights of the report include the following:
• When compared with 2008, the year 2010 saw a 0.41 percent decrease in auto premium leakage due to a number of different factors. However, it still made up almost 10 percent of the personal auto premiums which were written last year for $164.1 billion.
• Both annual and commute mileage report flaws were the top rating factor error contributor last year, making up a loss in premiums of over $3 billion.
• Driver characteristics and discounts, as well as unreported drivers made up premium losses of $1.9 billion and $2.7 billion, respectively.
• Premium leakage from policyholders who said that their vehicles were strictly for personal use when they were actually used for business purposes declined by 0.02 percent.
• There was a notable decrease in the premium leakage resulting from violations and accidents (0.2 percent) and from errors in driver characteristics and discounts (0.27 percent)
According to the president of Quality Planning, Dr. Raj Bhat, though they believe that people were driving more last year, they also feel that the overall increase in mileage “obscures the fact that there was a segment of the population whose driving was drastically reduced due to job losses and tougher economic times.”