Underwriting practices and solutions evolve as MVR costs riseBy Robby Hobbs | November 11, 2015
A new Verisk analysis finds that motor vehicle report (MVR) fees have increased an average of almost 50 percent during the past ten years. Nationwide, as of January 1, 2016, the average MVR fee will stand at $9.50, compared with $6.48 in2005.
A comparison of fees charged between 2005 and 2015 reveals that MVR costs grew at an average annual rate of 3.9 percent, nearly twice as high as the rate of inflation. By comparison, the Consumer Price Index (CPI) rose at an annualized rate of only 2.2 percent over the past decade.
Trends across states
MVR costs vary dramatically by state, and many states have recently increased fees. Between 2005 and 2015, 36 states plus the District of Columbia raised MVR fees, while only 14 held steady. The increases have been dramatic at times. Ten states have at least doubled their MVR fees since 2005, while Florida almost quadrupled them and Oregon experienced a six-fold increase. Oklahoma, which charges $27.50 (including a $2.50 transaction fee), ranked as the costliest state.
Impact on insurers
Fee hikes have a significant impact on the auto insurance market, since MVR reports remain an important tool for accurately rating auto risks. Insurers that pay more for MVRs may find their profit margins squeezed. In addition, insurers that decide not to order MVRs to avoid the cost may fail to identify and price appropriately for risks, which could lead to lost revenues from premium leakage.
Most insurers do obtain MVR reports when they write new risks. Some states, such as North Carolina, even require that they do so. But many underwriting departments are shifting away from ordering MVRs on their entire renewal book because of the expense. Instead, the industry is gravitating toward violation monitoring programs that alert insurers to new adverse activity posted to a policyholder’s driving record. Monitoring for violations allows insurers to optimize their reunderwriting spend, allocating dollars exactly where and when they should spend them.
In positive news for insurers, two states implemented programs in 2015 to help insurers monitor policyholders’ driving records. Verisk is working with Texas’s Driver Record Monitoring Service (DRMS) and a similar program in Delaware to improve insurers’ access to timely violation data and streamline the underwriting process for companies doing business in those states.
There are many ways for insurers to save on the high cost of ordering MVRs yet manage risk accurately. If you’d like to discuss how Verisk violation-data solutions can help optimize your MVR spend—at point of quote, midterm, and policy renewal—please contact me at RHobbs@Verisk.com.