School is officially back in session. This means a little bit of reflection on what we’ve learned and a lot of new information. It’s no different in the auto insurance industry.
Historically, insurance carriers have spent the majority of underwriting expenses on Motor Vehicle Reports (MVRs) to better understand drivers’ history. A deeper look shows that the industry average maintains that only 20% of drivers have ratable violations. That means 80% of drivers have a clean driving record – resulting in wasted dollars and an inefficient underwriting process.*
Exactly how much is wasted? Auto insurance carriers spend up to 60% of their underwriting expenses or roughly $1.2 billion annually on MVRs, making them the industry’s single largest underwriting expense.
MVR costs continue to rise across the country – currently ranging from approximately $2 to $28 per record. And these prices are increasing as states look to generate more revenue – in some cases an increase of $10 per report. That’s a staggering increase in expenses for an auto insurance carrier that needs to validate driving records.
To add injury to insult, MVRs often exclude relevant citation information regarding pending, active, downgraded, dismissed or out-of-state violations.
For profitable underwriting decisions, it is simply too expensive to order an MVR on every driver in comparison to the value it provides. Auto insurance carriers simply need a better way to access and analyze data about driver behavior affordably, while also maintaining profitable growth and accurate rates for applicants and policyholders.
It’s clear there is room for a better solution. A better, more timely and more accurate indicator of driver risk and violation activity can optimize cost and potentially result in up to 50% savings in underwriting costs. To eliminate unnecessary MVR expenditure, insurance carriers can use court record violation information to show when an MVR is needed, thus reducing the expense of purchasing an MVR for every driver. This type of data is sourced directly from jurisdictional public court records, which offers valuable information before it appears in a state MVR.
By using court record violation information to optimize the underwriting process and create an MVR alert, insurance carriers can screen drivers and applicants with more efficiency and less cost. On average, insurance carriers experience approximately 30-50% savings rate from using DriverRiskSM Alert as an MVR optimization tool.
TransUnion DriverRiskSM, in partnership with Drivers History, can help carriers optimize MVR expenditure by identifying those drivers with violations and eliminating the need to order MVRs for drivers without violations.
Maintain accuracy and efficient underwriting while managing costs? Now that’s good business.
*Industry average based on TransUnion research using carrier-provided data for a standard book with a three year policy look back period.
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