Nov 28 2023
The economic conditions of the early 2020s had a unique impact on the automotive industry. Dubbed trimflation by car culture website Autopian, the output in entry-level models was greatly reduced, while high-margin trims became more commonplace and MSRPs were increased across the board. UMass Amherst Professor Isabella Weber noted, “Companies in the automobile sector [amplified] price pressures enabled by a form of temporary monopoly granted by the computer chip shortages. This allowed car producers to focus on expensive models with higher margins and generally raise prices without having to fear a loss in market share.”
This shift is now largely the norm in the automotive industry, with the Base MSRP across trim levels within a model line continuing to expand, with an emphasis on luxury options; as an example, the Ford F-150 has some of the widest base MSRP variation across trims within a single model. Another model that displays this “trimflation” is Porsche 718 Cayman, whose MSRP ranges from $63,400 in base trim to over $149,000 for a fully loaded model. Each case illustrates that the difference between the lowest-priced trim and the highest-priced trim is greater than the base MSRP of the lowest-price trim.
This trim diversity and the rapid increase in costs present an operational challenge for auto insurers; any significant misalignment on the trims and option packages for the vehicles they are insuring could lead to inflated loss ratios and more frequent subrogation. However, there are options for capturing the bulk of vehicle data needed to accurately assess its value and potential repair costs, without adding excessive overhead.
DataOne Software has explained the differences between pattern and option-level VIN Decoding in previous blogs, but neither is a perfect fit for the explosion in the trim variety and MSRP ranges. Pattern-level VIN decoding is sometimes simply not granular enough; it is able to narrow down the vehicle to a single trim occasionally but often returns a handful of trims and other variants (such as bed lengths for trucks, and interior and exterior colors). However, even factory-standard parts can vary meaningfully across trims, and without the ability to distinguish differences in elements like safety packages and MSRP, insurers may open themselves up to the policy loss and litigation risks described earlier.
Option-level (17-digit) VIN decoding, typically supported by OEM Build Data, provides the in-depth detail needed to make accurate vehicle evaluations, but there are conditions attached. The fees attached to option-level VIN decoding can make it cost-prohibitive for some organizations. Additionally, OEMs can often impose usage restrictions on Build Data, often limiting its use to facilitate the repair of vehicles with non-OEM parts. More recently, many auto manufacturers are also looking to bundle and sell their own coverage offerings as part of the vehicle sale. As a result, they may not be willing to license their build data to a carrier they now view as competition.
Automotive data providers such as DataOne can offer a “best of both worlds” option between pattern and option-level VIN decoding, which is a “trim-level” decode that pares down the VIN to a single trim. The vehicle data return encompasses style, length, interior and exterior color, factory-standard equipment and safety features, and the base MSRP. The options typically associated with that trim can then be inferred from DataOne’s verified records, which leverage existing internal knowledge of the company’s production history for that model. That knowledge is sourced through independent research, as well as partnerships with other parties. Users of trim-level decoding are then able to determine the best possible segmentation of the vehicle population they insure based on the MSRP of the trim and commonly installed options, without trying to factor in an overwhelming number of details and variables (as well as the costs) associated with Build Data-based VIN decoding.
There are many different solutions available to address a business’ VIN decoding needs - price, precision, and depth of information are all variables that need to be considered. In many cases, trim-level VIN decoding can be the best tool for the job of quoting and pricing policies. It provides the right amount of detail to segment your vehicle populations and accurately price and quote without inundating you with expensive and unnecessary details that would not change your policy pricing and strategy.
If you would like to learn more about utilizing verified records for policy generation, claims management, or underwriting, you can schedule a conversation with one of our data experts through the link below.
Cover Photo Credit: RL GNZLZ via Flickr