You may already be using data to find undisclosed drivers while binding your auto policies, which could help you capture premium you might otherwise miss. Unfortunately, not all policyholders are upfront about new drivers in the household.
It’s not a trivial matter. Undisclosed drivers are the largest source of premium leakage across the property/casualty industry, with a 2016 Verisk study estimating they cost personal auto insurers $10 billion per year in missed premium. Analysis of internal Verisk data indicates that as much as 12 percent of auto claims are from drivers not listed on the policy. And according to the Pew Research Center’s analysis of Census Bureau data, in July 2020, 52 percent of 18-to-29-year-olds in the United States were living with their parents.
A recent Verisk study for a midsize regional insurer found almost 50 percent of its renewal policies had at least one potential undisclosed driver.
Meanwhile, newly licensed teenagers have long accounted for a significant portion of undisclosed drivers in many insurers’ portfolios. The 2016 Verisk study reported findings from one top-ten insurer that it took an average of 13.6 months for new drivers to be added to policies, costing more than $1,000 in lost premium for each instance.
The pandemic added a wrinkle to the typical pattern, as shutdowns of motor vehicle agencies likely slowed the issuance of new licenses. One Verisk client saw youthful, discovered drivers fall from about 60 percent of all discovered drivers to less than half that percentage during the height of the pandemic. More recently, however, the percentages have reverted to near historical levels.
As “boomerang kids” keep coming back home and teens return to a more normal progression toward licensing, what are you doing to identity new exposures in your insureds’ households?
Refresh data at renewal
Many insurance organizations use undisclosed driver data to help prefill auto quotes and rate or exclude before they bind the policies. But the same insureds who leave drivers out at initial quote may be more likely to forget or omit when the household has a new member or youthful driver. That often leaves the insurer to fill in the gaps.
A new approach is to use undisclosed driver data throughout the policy life cycle, not just at initial quote. Insurance organizations can take the additional step of processing their renewal book through those same data sources to identify potential new household members. A recent Verisk study for a midsize regional insurer found almost 50 percent of its renewal policies had at least one potential undisclosed driver.
A custom blend of data
Verisk’s new Undisclosed Driver Information (UDI) – Household Driver solution combines multiple unique data sources, including Verisk-exclusive contributory data, as well as driver data from state motor vehicle records and trusted third parties. The outcome is actionable information on drivers of all ages, not just youthful drivers.
For insurance organizations that don’t have their own outbound call centers capable of follow-up to verify driver information, UDI is also available within Verisk’s RISK:check Renewal, a customizable premium leakage analytics and consumer outreach solution.
Learn more about how Verisk can help you and your customers identify new exposures.