NU Online News Service, May 14, 11:25 p.m. EDT
Policyholders don't always accurately report lifestyle changes that could negatively affect their auto policy premium rates, according to a report from a ratings consulting firm.
San Francisco-based Quality Planning, a Verisk Analytics company, said its review of auto policies from various carriers found that "drivers are significantly more likely to report life changes that reduce auto premium than report changes that increase premium."
A 2009 review of 337,543 policies found that while policyholders do report life changes as they occur, they are not forthcoming about the true impact of those changes.
Quality Planning said that close to 24 percent of policyholders who changed address claimed the change would not impact their annual miles driven and slightly more than 47 percent claimed the change would not affect their commute distance.
Similar disparities were found for those who added or dropped a driver from their policy.
"In general, we find that drivers report mileage decreases five times more often than they report mileage increases," the report said.
The same is seen in reporting changes from commute to pleasure use, where drivers are three times more likely to report a change to pleasure use than from pleasure use to commute.
This distortion of information, as the consultant calls it, means that ratings of "millions of policies are flawed due to incorrect rating factors."
Quality Planning said that one way for insurers to combat these "errors in rating data" is by committing to customer contact. Customers feel the insurer cares about them and is aware of the individual factors that go into underwriting.
Such contacts can also increase retention rates, the report noted.
A copy of the report is available online at www.qualityplanning.com.
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