In 2010, rating error reduced private passenger auto insurance industry premium revenue by $15.4 billion. The reduced revenue was essentially a multi-billion-dollar industry donation handed directly to policyholders — although no charitable tax deduction accompanied the effort.
The estimate is based on nationwide auto policy audits conducted by Quality Planning, a Verisk Analytics company that specializes in the validation of policyholder information. Premium rating error represents 9.36 percent of a total $164.10 billion in personal auto premium written. Without action, insurers will continue to lose billions more over the coming years — all due to premium leakage that could be stemmed if appropriate action were taken.
In this report, Quality Planning has aggregated and summarized audit results of roughly 5 million policies from multiple carriers. The data includes substandard to preferred books of business, all distribution channels, and national and regional carriers. State-level data is then weighted to reflect the total national private passenger auto line.
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