Insurers spend a significant amount of time and resources trying to accurately rate and underwrite private passenger auto policies at the time of submission so they can decrease exposure to risk and provide the right coverage for the right premium. But that’s not the only time you should pay attention to potential risk exposure. There are additional points along the insurance continuum where increased risk is introduced into the equation. You could easily be missing the opportunity to appropriately reassess risk and charge a premium commensurate with that risk at any of these points. One of these increased exposure points is when a policyholder wants to add another driver to a policy.
Traditional underwriting wisdom is that most of the drivers added to existing insurance policies are newly licensed, youthful drivers who have no reported claims activity. Because of this assumption, many carriers think there’s no need to investigate loss history on these drivers. The insurer simply adds the driver and adjusts the premium as applicable based on the driver’s age and/or years of driving experience. That’s a common practice that could leave your business vulnerable to increased risk.
LexisNexis Risk Solutions conducted a review of 250,000 newly added drivers over a one-month period. As it turns out, 50% of these drivers were age thirty 30 or older―clearly not youthful, inexperienced drivers. Fifteen percent of all the added drivers had potentially surchargeable losses―in other words, accidents.
These identified losses represent an industry-wide $5 million per month, or $60 million per year in lost premium. That’s a significant financial impact. The failure to fully evaluate each of these drivers at endorsement clearly poses potential risk to an insurer’s business.
It’s an industry best practice to use LexisNexis® C.L.U.E® Auto at quote or policy bind to ensure new policyholders are thoroughly vetted for claim activity. By also using C.L.U.E. at endorsement, you can uncover claim activity you might otherwise have missed if your practice is to simply approve new drivers without investigation when you add them to an existing policy. With C.L.U.E. Auto, you can make sure you incorporate valuable insights into rating at every stage of the insurance continuum.