The process of underwriting for auto insurance policies involves many steps and needs to account for a number of risk variables. The vehicle specifications are just one piece to consider when assessing risk. Some others include client demographics, geography, and driving history.
As the variety of available vehicle safety equipment continues to increase, so does their effect on insurance risk ratings. It’s important that underwriters utilize the right resources to help them understand the options available, thereby saving them time and increasing process accuracy.
Below I’ve highlighted three challenges that evolving vehicle safety equipment has presented and how a VIN decoding and vehicle data solution can help streamline the discovery process, resulting in more cost effective risk mitigation.
1. Standard and Optional safety equipment vary significantly
Certain vehicle safety equipment can be either standard or optional depending on the vehicle make, model and trim levels. Underwriters may not always be aware of which vehicles offer these advanced safety features without doing additional research. This is where a vehicle data solution comes in handy.
Installed and optional safety equipment can be easily determined using a VIN decoder or YMMT search tool that runs simple queries to deliver vehicle database files. Both options are available through a reputable vehicle data provider. Some vehicle data web services also give an option to select trim levels and return common vehicle attributes when they are not encoded in the VIN or the VIN is not readily available for vehicle identification. ABS, traction control, parking sensors, blind spot detection, lane keeping, and autonomous braking are all examples of equipment that can significantly reduce the risk associated with insuring a vehicle, regardless of the composition of the policy. Though the supporting data is not available for recent advanced safety features, these technologies are designed to reduce the incidence of events that lead to costly insurance claims (repairs, property damage and personal injury).
In some scenarios, the presence of safety equipment that is focused solely on occupant safety, like numerous airbags or crumple zones, can have a different and more complex effect on risk assessment. Since they do not contribute to collision mitigation, and instead often lead to costly repairs, this safety equipment may actually increase the expected cost associated with collision coverage. However, in a balanced policy, insurers are still likely to reduce overall risk rating when factoring in injury settlement savings.
In order for insurance underwriters to accurately assess the risk of each vehicle, it's important that they take into account both standard and optionally installed safety equipment, as they affect each policy differently. In many scenarios, these installed safety features help contribute to a lower risk rating.
2. Current safety equipment names differ across OEMs
As noted previously, there are several new advanced safety technologies available on the market today. Some of these include back-up cameras, lane-keeping assists, cross traffic alerts, and night vision. The challenge insurance underwriters face with some of the modern safety equipment is that the names differ among OEMs. For example, Honda refers to their autonomous braking technology as the "Collision Mitigation Braking System" while Volvo refers to their similar technology as "City Safety."
Most vehicle data providers can offer safety data. The best providers make sure the equipment they capture is normalized. Sifting through the diverse marketing names manufacturers use to describe their safety features is tedious. Working with normalized data enables insurance underwriters to more efficiently utilize vehicle data across all the OEMs in their business processes.
3. Accessing vehicle data from various resources is time consuming and inefficient
There are many more factors of vehicle analysis that determine risk ratings aside from standard and optional installed vehicle safety equipment. Some examples include crash test ratings, recall information, safety awards, and vehicle values.
For accurate and cost-effective underwriting, it's essential that these resources are all available in one central location. Choose a vehicle data solution that can provide mapping to these data sets, accessible by decoding a VIN or searching by YMMT. Utilizing a vehicle data provider will increase accuracy and minimize the amount of research necessary for an underwriter to rate the risk of a particular vehicle.
What are some of the challenges your insurance company faces when underwriting vehicle insurance policies? How have you taken advantage of implementing more detailed vehicle data into your rating process? Please share in the comments section below!