Sports Cars Replacing the John Deere: New Farming Trend or Costly Insurance Fraud?

Study conducted by insurance analytics firm Quality Planning determines that luxury sports cars are probably not hauling hay on the farm.

SAN FRANCISCO, May 24, 2011U.S. agriculture has undergone a dramatic change in the last century. One aspect of this is the shift from small suburban farms to large specialized farms that operate in rural areas with a laser-like focus on efficiency and the latest technology. And in a recent study, analysis firm Quality Planning uncovered a still newer innovation in agriculture: the apparent use of passenger vehicles for farming! Indeed, inner-city farming appears to be emerging as a popular vocation in well-recognized “farming communities” that include Brooklyn, Houston, San Francisco, Scottsdale, and even the nation’s capital.

The question auto underwriters are asking is: Why? The answer is linked to the rating factors that insurance companies use to determine policy premiums. Many auto insurers offer substantial farm-use discounts of up to 20 percent to people using their vehicles exclusively on a farm, where the chances of a collision, theft, or other mishap befalling the vehicle are much reduced when compared with urban use. But are all vehicles declared as farm use really used for farming? In some cases, the type of vehicle employed in pursuit of these agricultural endeavors would seem rather unsuitable for farming, with the BMW Z4, Cadillac XLR, Jaguar XJ6, Mercedes SL550, and Porsche Carrera among the most surprising farm-use vehicles.

The problem facing insurance companies is that, unlike the information about at-fault accidents and violations provided by state driver-licensing agencies, there is no perfect method for determining if someone truly lives on a farm. Quality Planning, a subsidiary of Verisk Analytics that verifies policyholder data for auto insurance companies, selected approximately 80,000 vehicles for which a farm-use discount was claimed in policy year 2010 and examined the garaging address of each. Geocoding techniques helped determine whether the immediate area was urban or rural and if anyone was actively engaged in farming in that area.

Although some policyholders do live in areas that are a combination of urban, suburban, and rural, there are people who live in strictly urban areas where there is little evidence of farming activity – such as Brooklyn, for example. Of the sample, 6,382 vehicles (or roughly 8 percent) are garaged in ZIP codes where, according to the 2000 census survey, less than 1 percent of the population engaged in agriculture. Quality Planning then examined the average annual premium for vehicles for which the farm-use discount was claimed and found that the average annual premium in urban areas was $608, compared with $446 for farm-use vehicles in nonurban areas.

The differential suggests that vehicles receiving a farm-use discount in urban areas tend to be more expensive and/or are domiciled in cities with higher auto insurance rates. The large difference in rates acts as an incentive for policyholders and, oftentimes their agents, to seek creative discounts. Since farm use is seldom verified, it is an easy tool that cheats can use to reduce the cost of auto insurance. A typical farm-use discount is often about 20 percent. So if an urban, non-discounted vehicle were properly rated at $760 per year, a $152 discount could be achieved simply by designating it as farm use. The premium difference for the most expensive sports cars (like the Mercedes SL550, which costs upwards of $100,000) is much higher. The breakdown of farm-use vehicles by body type is shown below.

Farm-Use Vehicles by Body Type

Body Type

Percentage of Vehicles

Pickup truck












Sports car/convertible



“Misapplication of the farm-use discount is one of a number of frauds perpetrated on insurance companies by dishonest policyholders and their agents,” said Robert U’Ren, senior vice president of Quality Planning. “We estimate that premium leakage from the farm-use discount alone totals about $150 million annually. Rating errors such as these introduce significant inequalities into the insurance equation and, unfortunately, raise rates for all drivers. Honest people end up subsidizing the insurance premiums of dishonest people, and careful drivers subsidize high-risk drivers. And in a very real sense, our farmers are subsidizing unscrupulous city dwellers.”

About Verisk Analytics
Verisk Analytics is a leading provider of information about risk to professionals in insurance, healthcare, mortgage, government, and risk management. Using advanced technologies to collect and analyze billions of records, Verisk Analytics draws on vast industry expertise and unique proprietary data sets to provide predictive analytics and decision-support solutions in fraud prevention, actuarial science, insurance coverages, fire protection, catastrophe and weather risk, data management, and many other fields. In the United States and around the world, Verisk Analytics helps customers protect people, property, and financial assets. For more information, visit

About Quality Planning
Quality Planning is focused on providing rating integrity solutions to auto and home insurers. A member of the Verisk Insurance Solutions group at Verisk Analytics, Quality Planning works with insurance companies to identify areas of significant rating error using sophisticated database management, statistical analysis and modeling, customized survey design, and highly targeted customer interaction. Quality Planning helps clients work within their existing rating plans and charge fair prices to policyholders based on a true representation of risk. The company was founded in 1985 and is headquartered in San Francisco. For more information, visit

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George Opelka
Senior Vice President, ACI

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