When was the last time you told your car insurance company how many miles you actually drive every year? It was probably the last time you shopped around for a new car insurance policy. Is that number of miles driven still correct? Have circumstances in your life changed such as a new job that requires you to drive a longer commute to work? Did you give a low guess as to the number miles you drive to your car insurer from the beginning?
You may be surprised to find out that your car insurance company has a number of ways to find out when you are lying about your driving habits. Not only does inaccurate reporting hurt the car insurance companies, but you could be faced with higher car insurance premiums in the future because of all this fibbing.
Why so many fib to their insurance
Car insurance companies use a variety of factors when determining how much you will pay for your car insurance premiums. They use details about driving history, accident history, the number of claims you have filed, your driving habits, your credit score, and other factors. Most drivers understand that insurers ask about the number of miles you drive each year because there is a direct correlation between the amount you drive and your likelihood to file a claim against your car insurance.
Simply put, driving more puts you at a greater risk of an accident. But, purposely understating the number of miles you drive every year to your car insurance company in order to receive a lower insurance premium can have serious repercussions.
Premium leakage is a big problem for insurers
A recent report from Quality Planning, a research firm for the insurance industry, found that car insurance companies lost an estimated $15 billion in premiums because of incorrect information policyholders reported to them. This is called premium leakage, and car insurance companies consider it a big deal for obvious reasons.
There are several ways that your car insurance company can find out that you have not been telling the truth about your driving habits and, specifically, how many miles you are driving each year. Not only do they ask you about your driving habits when you initially purchase the policy, they collect data from other sources such as the car dealership and your mechanic.
They also collect data from any claims you file, and they pick up warning signs of fraud by mining their huge data base for anomalies in reported data and statistics using complex proprietary algorithms on driving behavior. Car insurance companies even hire consulting firms to help them track down serious offenders who have lied about their driving habits.
New insurance features could cost you
Another way that you can let the cat out of the bag on how much you actually drive is by volunteering the information yourself. Pay as you drive monitoring services such as Progressive’s Snapshot program have been profiled on televisions commercials and are increasing in popularity. The car insurance industry is pushing these programs heavily now with the lure of big savings on premiums.
In fact, several insurers now allow you to plug a small device into your car’s data port to record information about your driving habits. Customers are flocking to the program in the hopes of saving on car insurance. The car insurance companies have praised the programs as saving their customers an average of 10% to 15% and as much as 30% in some cases.
This is a great tool that can prove you deserve a lower premium on your car insurance if you are actually a safe driver. The device measures the number of miles you drive, how often you brake hard, and the time of day you are driving. But, the pay as you drive device does not monitor your speed or track you by global positioning satellites (GPS).
Most car insurance companies like Progressive do not use the data to raise your car insurance rates initially if the results are negative. The one danger, though, is that car insurance companies are able to hold the data that they collect against you the next time you renew your car insurance policy. Since most policies are renewed and re-priced every six months, using one of these devices could backfire.
What about you? Have you been honest with your insurance company? Have you ever used a pay as you drive monitoring device in your car? If so, what has your experience been like?