If you write personal lines auto policies, you know that you have commercial use on your book. But you may be surprised to learn that number is likely much higher than you think. Our studies show that up to 10% of your book is made up of at-risk vehicles like half-ton trucks or larger, cargo vans, sprinters and transits. And of that 10%, we typically see at least 4% commercial use and even up to 10% in some cases. As one carrier said to us, “commercial use is beyond an epidemic.”
Commercial Use Hits Combined Ratios
Want to make a quick and positive impact on your combined ratio? Do something about commercial use. If you lose $1000 in annual premium differential for every policy written as personal that should be commercial, the numbers quickly become staggering and can add up to the millions for larger carriers. It’s no secret that carriers face fraud at every turn. And here’s the dirty little secret these fraud perpetrators believe: insurance fraud is a victimless crime. No harm? No foul? On the contrary, we all pay for fraud. Yet, year after year, research by the Coalition Against Insurance fraud and other organizations has shown that consumer attitudes toward fraud are in a downward spiral of growing tolerance. The percent of people who say it is acceptable to commit fraud seems to steadily grow.
The Epidemic Hiding in Plain Sight
The easiest way to prove commercial use is with photos – empirical evidence that shows ladder racks, signage, commercial lifts or toolboxes. Carriers nationwide are turning to license plate recognition data to get those photos and provide that proof. DRN operates license plate readers nationwide, 365 days a year, 24 hours a day, capturing license plate images and data including a picture of the vehicle, a date and time stamp and a location. Capturing vehicle sightings with license plate recognition (LPR) cameras simply automates a process that could be done using any phone or camera.
DRN pioneered the use of these vehicle sightings for the auto industry where they now recover billions of assets using the technology. These vehicle sightings, unlike telematics data require no opt-in from the policyholder. And after all, why would a policyholder intent on getting a cheaper personal policy agree to telematics? You can literally see the evidence of commercial use with a simple photo. You may think you insured a pickup for personal use, but pictures show you insured a pickup with a ladder rack and a sign promoting a construction business. If you are waiting until a claim happens to address the fraud, you have already lost premiums and you are losing money processing that claim. With the photographic evidence that pictures can provide, your agents are better armed with definitive evidence of commercial use, and can either adjust the policy to reflect a commercial rate or get the policy off the books. And with all states allowing carriers a 30-day window to update a policy or withdraw a quote, online “instant“ insurance carriers can insure now and check photos of vehicle sightings later for any policy flagged during preliminary analysis.
Article by: Alex Young
Source: Property Casualty 360