Auto Insurance Mileage Verification: Fact Or Fiction?

Auto insurance companies verify a customer's mileage to ensure they are charging an appropriate rate for their policy. The number of miles a vehicle owner drives is strongly correlated with the number of insurance claims they file. Therefore, a driver who travels more miles per year is more likely to get into an accident and will need to pay a higher premium.

However, verifying a customer's mileage is challenging, and many insurers are hesitant to make it a top rating factor. In the United States, auto insurers lose $5.4 billion every year due to underreported mileage. Some drivers may even lie about their mileage, which can constitute fraud.

To overcome this issue, some insurance companies use technology to collect mileage data. For example, they may ask drivers to install tracking devices in their cars or use data from state or national databases. Other methods include self-reporting, where insurers call customers to ask for a current odometer reading, or using data from service records.

Self-reporting

Additionally, collecting self-reported mileage is a costly and time-consuming process for insurers, and it creates an inconvenience for policyholders, who have to keep track of their mileage and provide updates. It can also be difficult for insurers to verify the accuracy of self-reported data. As a result, some insurers are turning to alternative methods of mileage verification, such as smartphone telemetry, third-party data sets, and API platforms. These methods can provide more accurate and up-to-date information on a driver's mileage, helping insurers set more accurate rates and reducing the risk of fraud.

Tracking devices

There are two main types of auto insurance tracking devices: physical telematics devices and smartphone apps. Physical telematics devices, also known as dongles, are installed in the vehicle. Smartphone apps can detect behaviours like sudden acceleration and hard braking but do not have direct access to information from the OBD-II port.

Some insurance companies offer discounts to drivers who agree to use tracking devices. These devices can help insurance companies identify their safest drivers and reward them with lower rates. Tracking devices can also help control insurance prices for people who don't have them installed by helping to combat phony insurance claims.

While tracking devices can provide benefits, there are also concerns about privacy and data security. Some people may be nervous about their driving habits being monitored, while others worry about their data being stolen. However, insurance companies typically encrypt the data they collect and only share it with law enforcement agencies when legally required.

It's important for drivers to understand what data a tracking device will monitor and how it could affect their insurance rates. For example, driving at night or in high-crime areas may result in higher insurance rates, even if the driver has a short commute.

State/national databases

State and national databases are one of the methods auto insurance companies use to verify a vehicle's mileage. This is done to ensure that the insurer has an accurate picture of how many miles a policyholder drives, which is important for setting rates that reflect driving behaviour. For example, a driver who travels 12,000 miles a year is more likely to get into a car accident than someone who drives 4,000 miles a year.

However, data from third-party sources may not always be accurate. Information may be gathered from state inspection providers, maintenance, repair shops, and car dealers, who may enter mileage information incorrectly.

In the state of Massachusetts, for instance, the number of miles on a vehicle is documented during its yearly inspection and reported to the registry of motor vehicles. Insurance companies can then easily look up the average annual mileage.

Some insurance carriers use national databases and Motor-Vehicle Reports (MVRs) to confirm vehicle mileage. They may also use national database information to check how often a vehicle is serviced, such as getting an oil change, to verify if drivers are accurately reporting their mileage.

Car servicing records

When checking a car's service history, it is common to refer to its service book, which logs all services, repairs, and the vehicle's mileage at the time of each service. However, service books can sometimes go missing, so it is important to know how to obtain this information from other sources. If the service book is missing, you can contact the garage that usually services the car, as most garages keep records of vehicle service histories, either online or as paper copies. You may need to provide proof of ownership, such as the vehicle's log book (V5C form), to access this information. If there are still gaps in the service history, you can try contacting the previous owner, checking the MOT history online, or reaching out to the vehicle manufacturer to confirm which dealer the car was originally sold through using the vehicle identification number (VIN).

It is worth noting that in recent years, some manufacturers have started offering Digital Service Booklets instead of hard copies, which can be accessed online. Additionally, some manufacturers keep an online record of any car serviced by a franchised dealer, which can be retrieved by any dealership. To check a car's digital service history, you may need to fill out a form and provide a valid reason for your request.

While it is not a legal requirement to maintain a full service history for a vehicle, it is essential for keeping the car in good condition and can significantly impact its value. Regular servicing can help prevent unexpected breakdowns and save you from costly repairs in the long run. Therefore, it is recommended to get your service book stamped by a mechanic or garage after each service and to keep all relevant records and receipts.

Odometer readings

However, getting accurate odometer readings can be challenging. Many insurance companies rely on self-reported mileage data, which is prone to underreporting. Policyholders may provide rough estimates or intentionally lie about their mileage to qualify for lower rates. This practice results in significant losses for the insurance industry, estimated at $5.4 billion annually.

To address this issue, some insurance companies are turning to technology for more accurate odometer readings. Smartcar, for instance, offers a software solution that allows insurance companies to access policyholders' actual odometer readings remotely. This technology communicates directly with 3G and 4G telematics modems built into vehicles, eliminating the need for self-reporting or aftermarket hardware devices.

Other methods used by insurance companies to collect odometer readings include tracking devices installed in vehicles, data from state or national databases, and service records from oil changes or maintenance visits. These methods can help insurance companies verify mileage and set rates accordingly.

While not all insurance companies rely solely on annual mileage to set rates, accurate odometer readings are essential for fair and accurate pricing. Policyholders should provide up-to-date mileage information to avoid issues such as incorrect rates, fraud allegations, and unexpected renewal pricing increases.

Frequently asked questions