vehicle location data solutions to fill in the
blanks. For example, your policyholder reports an address in Greenville, South Carolina, but the vehicle location data shows
that vehicle has never been seen at that address. It has, however, been seen 180 times
at a location in the Bronx. That’s the power
of “where” or vehicle location data – the
sightings don’t lie, but people often do.
Taking on garaging fraud
Garaging fraud is such a commonly accepted behavior that policyholders often
brag about how much money they can save
with it. The industry estimates that insurance premiums are one percent higher than
they would be without garaging fraud. For
carriers, every one percent of a rating error
left uncorrected causes a 20% profit loss.
As a result, garaging fraud adds up to more
than $2 billion in annual premium leakage.
Garaging fraud can be committed in
several ways. For example:
THE UNINTENTIONAL FRAUDSTERS:
• Snowbirds: They fly both ways. They
either comprise the 750,00 people who
temporarily move to warmer climates
during cold winters in other parts of the
country, or the other 600,000 who can’t
take the heat and get out of the South or
Southwest during the summer.
• College students: More than 2. 5 million
U.S. students are returning students
who live out of state, and take the old
family truckster with them when they
drive back to school. Carriers miss the
majority of these students who change
where they keep their vehicles.
• Movers: Carriers often change the
billing address, but fail to verify and/
or change the garaging address. With
more than 7. 5 million people moving
out of state each year, this is a demographic worth keeping an eye on.
THE “SHAME ON YOU” FRAUDSTERS:
• Agents: Carriers report some agent issues which usually occur when there is
an unusual number of garaging issues
with the agent’s book.
• Consumers: Those who knowingly
commit garaging fraud are less likely
to be high-risk drivers, so their rates
are already low and they can fly under
the radar on the garaging issue.
With cases like this all over the country, a $1,000 fraud here and there really
adds up to a hefty amount. In fact, sample
book tests demonstrate millions in premium leakage.
For example, one carrier’s customer
listed the garaging address in Baytown, Texas with an annual premium
of $813. However, the vehicle sightings
data showed 150-plus sightings in New
York from June 2010 to June 2015, which
added up to $1,085 in annual premium
leakage and $5,500 premium leakage to
date. And that’s just one example of a
single customer from a single carrier.
“Where” data solves the garaging fraud
problem by collecting data on where the
vehicle is frequently spotted, allowing
carriers to “score” the policyholder’s address against the vehicle location data and
tell the carrier whether it needs to investigate further.
In addition to nabbing garaging fraudsters, intentionally or not, the “where”
data can also identify high-risk policies
(e.g., if the vehicle is actually being kept
in a crime-ridden area with high vehicle
theft risk, not in the safer neighborhood
listed on the policy).
Evidence shows garaging fraud
is predictive of loss
If policyholders are comfortable with
committing garaging fraud, the ques-
tion becomes: what else are they okay
with? Chances are if someone is will-
ing to lie about where they live; use a
P.O. Box, second address or a friend’s
address to avoid paying the correct pre-
mium for the risk, they will lie about
other things as well. Lies like, “existing
damage was the result of a recent car ac-
cident, the car was stolen even though it
was recovered at my boyfriend’s apart-
ment, my injury is very severe, or I was
only visiting New York from Florida
when my car was stolen.”
Attitudes about fraud are changing, yet
too many people still have a Robin Hood
complex when it comes to insurance car-
riers. A recent Insurance Research Coun-
cil survey found that 18% of respondents
believe it is acceptable to make up for pre-
miums paid in the past.
Carriers are beginning to take the position that liars lie, and that these liars are
inherently higher risks. In fact, an analysis shows that carriers can look at policies
flagged for garaging, and predict which of
these will add up to higher losses down
the road. These are the carriers who don’t
want liars on their books.
Carriers may still opt for telematics/
pay-as-you-drive plans as part of a comprehensive fraud-detection plan, but
“where” data can provide insights that
telematics can’t. Vehicle location data can
impact the bottom line, helping carriers
get fraud off their books more quickly,
saving them and law-abiding policyholders millions.
Alex Young ( email@example.com) is
vice president and general manager,
insurance, for DRN.
...A $1,000 FRAUD
HERE AND THERE
REALLY ADDS UP TO
A HEFTY AMOUNT.