Your Car Insurance Company May Know When You Are Lying

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Your Car Insurance Company May Know When You Are Lying

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.

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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?

27 Responses to “Your Car Insurance Company May Know When You Are Lying”

  1. Anonymous

    If insurance were such a good thing a. it wouldn’t be mandated by law b. it would only cover the person buying it and their property so if you personally wanted a safety net, you pay for it – not so someone else and their goods are covered on your behalf, regardless of “fault” c. you wouldn’t need insurance commissioners for every state to regulate their practices d. you wouldn’t see a rate hike (in some states) if you make a non fault claim over xxx dollars e. they would base your insurance on your risk for the thing you are seeking coverage on and not your credit history (aka risk of them getting paid) f. it wouldn’t cost you MORE because other people in your area don’t have it … etc etc etc

    the only ppl advocating complying with insurance companies are the pencil pushing trolls that work in the industry and dogs that will do anything for their masters for a pet on the head – anyone else with half a brain and a little dignity will cheat them every bit as much as they cheat us.

  2. Anonymous

    I have never heard of raising your insurance because of mileage. Until I was checking in on something and I found out that Liberty Mutual Insurance raised my rates from $1800 to $2400. I was never informed of the change. When you mentioned it they said they got the information from the registry of motor vehicles and cannot change the information. I do not believe that.

  3. Anonymous

    Anyone who thinks insurance is a rip off needs to educate themselves on the topic.
    If everyone was honest and rated properly the average rates would be a lot lower for the normal SAFE driver.

    You think its a rip off until you unintentionally cause a bad accident on the freeway that requires a person to be airlifted to the hospital and since you had no insurance YOU have to pay the entire bill for not only all damages to vehicles involved, the airlift and all emergency services, but also all the current and future medical bills of the poor person you hurt.

    But if you were smart and carried high liability limits than the insurance company would cover all of that up to your limits.

    CheapO, Debi, ballsnyoface (real classy), Alan
    I would love to explain how insurance works and how it is necessary in todays day and age.

    And John, Mercury automatically increases any vehicles mileage by 1,000mi on renewal if it is rated under 10,000mi annually. This is automatically done and their reasoning is because the average Californian drives 14,000 miles a year.
    Mercury is one of the companies our agency writes for and they are very strict with their program and underwriting guidelines.

    If anyone needs advise, particularly in California, please do not hesitate to reach out. We would love to help you.

  4. Anonymous

    Every year Mercury Insurance attempts to trip me up by upping my mileage at renewal time on each of my cars. I have 3 cars. 2 of which are collector cars and get driven no more than 2000 miles a year, the oldest is 20 years old and is driven no more than 6000 miles a year. We play our game and they lower my rate once again back to where it should be. Its rather fun catching them trying to mess with someone with 50 years driving experience who has never had an accident or ticket.

  5. Anonymous

    Control, control, control…help the insurance companies, it’s for your good…give me a break! Look at the insane profits these “wonderful companies” make and ask yourself one question – do they need our help making the world a better place? All you Do-Gooders go to work for an insurance company and you will change your tune. Guarantee it. Insurance is a necessary evil, nothing more.

  6. Anonymous

    I’ve been browsing online more than 2 hours today, yet I never found any interesting article like yours. It’s pretty worth enough for me.
    In my view, if all website owners and bloggers made good
    content as you did, the web will be much more useful than ever before.

  7. Anonymous

    No need to fib when you’re already getting the fairest rates! CURE Auto Insurance is a not-for-profit reciprocal exchange that saves NJ and PA drivers big bucks. They also don’t use credit score when calculating rates. Can your insurer say that?

  8. Anonymous

    I have seen good people fib on their insurance application and later either get a cancellation notice for misrepresentation or have their claim denied because of the fib.

    The worst fib is the one about the Uncle Bob that used to live in your home and had 3 accidents. When you tell your insurance that Uncle Bob no longer lives with your price goes down. Great!

    Until Uncle Bob gets in his 4th accident driving your car and upon further inspection still living with you.

    The insurance company CAN deny your claim for this type of fib…

    Be Safe

    policy price check

  9. Anonymous

    Perhaps the insurance companies need to reword their applications. I remember the last time we switched ins. companies, and the question was worded something like:

    “How many miles do you drive to work?”

    My wife is around the 6-mile mark (one way to work), but I told the agent that she puts 17k miles on the car each year.

    If they are truly after the total yearly mileage, then they should ask that question — not try to infer something from poorly written questions (or trick me into a “denial of coverage” issue based on their incorrect assumptions).

  10. Anonymous

    John is right. Lying to your insurance company in order to receive a lower premium is grounds for denial of coverage.

    If the insurance company discovers false information, they can legally deny any claims and drop coverage immediately. Their legal argument is that they may not have even considered you for coverage in the first place; given they had truthful material information to make their insurance decision.

  11. Anonymous

    Very great post. I just stumbled upon your blog and wished to say that I’ve really loved browsing your weblog posts. In any case I will be subscribing for your rss feed and I’m hoping you write again very soon!

  12. Anonymous

    It’s possible that in case of a claim (especially a large one because, for instance, you hit someone), the insurance company might try to point to the discrepancy between the actual mileage on your odometer and your claimed driving habits as evidence that you lied about your driving habits on your application. They could then try to use that lie to deny coverage.

    Even if you ultimately win the litigation you will be forced to enter into to get the insurer to cover you, you will have spent a ton in attorney fees. And all that to get the coverage that you would have been entitled to if you had not been trying to save a couple of bucks a month.

    (And no, I am not an insurance company representative trying to get insureds to pay more money. I am an attorney, and this is exactly what I would advise the insurance company to do in this situation if it were my client.)

  13. Anonymous

    debi – I understand where you are coming from, but I almost think that it is a case of the glass half full or half empty. If you do business with good, reputable companies, then everyone benefits when insurance companies have the best information in order to set their prices the most fair that gives them a profit, lowers our premiums, and rightly costs others who are poor drivers and at risk for costing the rest of us more money with higher accidents, etc.

  14. Anonymous

    I’m pretty sure my car insurance company actually has a mileage higher than what I actually drive in a year. I think I just went with what was average at the time I signed up and have never changed it, but I drive mostly to work and back (3 miles), to roller derby practice and back (~1 mile) and some running around in town. Occasional roadtrips for derby bouts, but all in all, I’m not exactly racking up the miles in my car.

  15. Anonymous

    I periodically have to supply oil change receipts showing mileage to prove that I drive as little as I do so that I can qualify for the lowest rates. I’m happy to do so since I save a bundle. It helps that I’m a telecommuter.

  16. Anonymous

    cheapO – If everyone provided insurance companies with incorrect data, all of our insurance premiums would be higher. We would be forced to supplement those pricing inequalities since the whole process would be very inefficient for everyone. Also, just to point out, every company you deal with is making money off of you. Should we stop using our grocery store loyalty cards because they are also collecting our shopping data from us while giving us coupons?

  17. Anonymous

    I will never feel bad for insurance companies..ever! I try to avoid insurance at all costs unless required by law. I don’t see why you have to provide them with accurate information. They are making money off of you..

  18. Anonymous

    A couple of years ago, I got a better rate on my car insurance when I told my insurer that I was not driving my car much and I found out I could quality for a lower rate. My 1994 Geo Prizm only has 53,000 mile on it because I only drive it occasionally. I use mass transit during the week for work.

    Occasionally, the insurance company sends me a form I must complete and return telling them what the mileage is.

  19. Anonymous

    We did Progressive’s Snapshot program last spring/summer. Overall, we had a very positive experience (plus it was interesting to view the data through their site about our driving habits) and saw rates decrease 15% on one car and 28% on the other after 3 months of data gathering. They then had us return the device. By participating in the program, we “agree” to allow them to collect data again with the device as needed, but it will be up to us whether we allow that to happen or simply decline and lose the discount. We were promised no increase in rates during the program, but I was wondering how they could overlook people with unsafe driving and not eventually spike their rates.
    Upon renewal in October, our Snapshot rates were continued with the same discount. Of course, they now have our habits recorded in their database, but it is nice to be rewarded for safe driving with lower premiums.

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