Truth and accuracy are vitally important to auto insurance companies. A few examples will help you understand just how important accurate information is in the underwriting process.
- 20 to 30 percent of policies contain unreported youthful drivers, which results in an inadequate amount of premium being collected for the risk
- 25 to 60 percent of policies contain under-reported vehicle use
- 48 percent of household auto policies experience a change of vehicles or drivers each year for which insurers are not always made aware.
These errors, being either the result of carelessness or misrepresentation at the time of the application, amount to nearly $15 billion in lost premium income. To each of us, that means we are paying approximately 10 percent more for our auto insurance that we should have to pay. Insurers are using sophisticated data to narrow this gap, but the very heart of the problem is collecting honest and accurate information from the policyholder.
The good news is most of us do not try to the cheat the system. People are generally honest, but a few wish to take advantage of others for their own gain. If it is determined later that a policyholder knowingly misrepresented information on their application for insurance, and this information was material to the company rating, or accepting the policy, the policy can be rescinded and the insurer can refuse to pay a claim.