Rating errors for auto insurance policies resulted in the loss of $16.1 billion in premium revenues in 2007, an industry research group said Friday.
Quality Planning Corp., which tracks information for the insurance industry, said the auto premium leakage
declined from the $16.6 billion lost in 2006. However, insurers' revenue losses still came to almost 10 percent of the $162 billion in auto premium revenues for the year, the Insurance Journal reported Friday.
The year 2007 saw the first decrease in auto premium leakage since Quality Planning began issuing this industry report five years ago,
said Raj Bhat, president of Quality Planning.
The decline came from the elimination of the mileage component from the ratings systems at several large companies, he said.
The Quality Planning report is an evaluation of more than 4 million policies written by 16 large insurers, the Journal said.
Some policyholders misrepresent facts and others don't report lifestyle changes. Others boldly commit fraud,
Bhat said.
Underwriting doesn't have to accept those trends as a cost of doing business or, worse, as justification to counterbalance leakage by inflating premiums for all policyholders.
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