Insurance companies may want to look at whether their auto insurance claim data is being disclosed to the public. This information should only be shared with the insurance industry's permission and involvement.

It makes sense for auto insurance providers to evaluate their current position on disclosing this type of data. With the growing use of vehicle history reports, as well as the ever increasing amount of accident and damage information being reported, it is imperative that consumers have access to information that shows their vehicles have been repaired to the high standards insurance companies demand. Without this information, policyholders will be ill-prepared to protect the resale value of their vehicles after an accident.

Insurance companies that demand high-quality repairs should not be concerned about diminished value claims due to sub-standard work. Disclosing details about the repairs — including shop certifications, the quality of parts used, and post-repair inspections — go a long way toward reassuring policyholders that their vehicles have been repaired back to pre-damage conditions. This, in turn, will help them negotiate more effectively when they later sell or trade-in a vehicle.

Fostering Safety

Even more important than the financial benefits of disclosure, sharing this type of information helps save lives.

It was a normal Tuesday morning for Pam Schumacher. She had been in the car for a few hours already visiting clients around suburban Detroit and decided to grab some lunch at the mall before heading to her next appointment. She waited patiently at the light for the left turn signal to enter the mall parking lot. The last thing she remembers is the green arrow and the sound of her turn signal.

A vehicle traveling the opposite direction came through the red light at approximately 35 miles per hour, barreling into the right-hand side of Pam's car. The force of the impact pushed Pam into the median and spun her back around to face oncoming traffic. Every airbag in her car deployed: Every airbag except the one that was supposed to protect her.

Unbeknownst to Pam or the auto insurance company that held her policy, the car had been in a prior accident in which the driver's side airbag (the one in the steering wheel) had deployed. Although the accident damage was repaired, for some reason, the airbag was never replaced. Fortunately, Pam escaped the accident with nothing more than minor injuries, but others have not been so fortunate. This is a growing problem within the used car market and one that vehicle history information providers are working to combat.

Unfortunately for Pam, information about the airbag deployment had never been reported to a vehicle history provider: This potentially life-saving piece of data was not disclosed to the public. Information about prior damage events can not only help protect consumers when they are purchasing vehicles but can also help insurance companies make better decisions about the cars they choose to insure. While Pam was fortunate, had things unfolded differently, claims for this particular accident may have risen exponentially.

The Value of Vehicle History Data

Insurance companies can reduce the chance of underwriting these rebuilt wrecks by adding vehicle history information to their process. Esurance started to add vehicle history information to its process a few years ago. When a policy is being written, Esurance accesses vehicle history data and checks if the vehicle has a title brand. If the vehicle has ever been branded, then Esurance contacts the customer to notify him that the vehicle will not be insured: This therefore protects Esurance and its customers from potentially dangerous vehicles.

Another growing concern for insurance companies is the alarming rise over the past year in auto insurance fraud. On September 10, 2009, the National Insurance Crime Bureau (NICB) announced that the number of suspicious insurance claims rose 13 percent. Suspicious auto insurance claims were up an alarming 21 percent. According to the Insurance Research Council (IRC), insurance fraud added between $4.8 and $6.8 billion to auto insurance payments in 2007.

Ferreting Out Fraud

One way insurers can more effectively combat fraud is to consult vehicle history information. One of the most common types of insurance fraud involves submitting a claim for pre-existing damage. While insurance adjusters have been trained to spot pre-existing damage when evaluating a claim, it is helpful for them to also be able to access information about previous events from a car's past. Vehicle history information providers gather data from thousands of sources and put it all into one report. All types of information can help SIU staff ferret out fraud. In addition to the obvious sources — including prior damage events from police reports or collision repair facilities — odometer readings, service records, state inspection results, and self-reported information can help quell fraudulent and inflated claims.

“Compiling a wealth of granular data can better help insurers uncover well-hidden auto frauds,” said Dennis Jay, executive director of the Coalition Against Insurance Fraud (CAIF). “Schemers depend on secrecy. In addition to dogged legwork by investigators, detailed data are a fraud schemer's worst enemy. Insurers can trace fraud schemes to their origins, identify the ringleaders and build stronger cases that allow prosecutors to nail down convictions.”

In addition, vehicle history information providers are working with insurance companies to reduce the time and costs associated with recovering stolen vehicles. Most vehicles are recovered within a few days of having been stolen. For those that are not, the chances of recovery diminish exponentially. However, the recovery rate tends to increase when insurance companies report these stolen records to vehicle history report providers.

The fact is that millions of people, used car dealers, and consumers view these vehicle history reports every year. Working closely with the NICB, Carfax can add an alert to a vehicle's history report if an insurer has reported that automobile as stolen.

The face of stolen vehicles has changed over the past 20 years. Fewer cars, especially high-end vehicles, end up in chop shops, and more are being concealed with cloned VINs. Law enforcement organizations, especially the FBI, are working closely with vehicle history information providers to heighten the ability to detect and report cases of potential VIN-cloning, thereby increasing the chances of recovering even more stolen vehicles.

It is in the collective best interest to share as much information as possible to protect policyholders, insure quality vehicles, and keep highways safe. Thus, insurers not currently working with a vehicle history information provider may be losing money. This means that insurers could be losing money associated with under priced premiums, fraudulent claims, and diminished value payments.