Being Confident Clear: The Key to Making Confident Driving Risk Violation Decisions

But there’s a fine balance in managing expenses without sacrificing underwriting efficiency and effectiveness. How confident are you in your clears?

Do you have this common blind spot?

A robust violation strategy is one good example for where auto insurers are looking for the right balance between spend and effectiveness. Internal and external campaigns seek to differentiate between clean drivers, and drivers with violations. When we speak with insurers about differentiating between clean and dirty drivers, most insurers focus on finding the dirty drivers. They ask: If I submit a list of 100 drivers, will I be able to identify the individuals with driving violation?

That’s a natural question to ask—and it’s understandable to focus on dirty drivers. But in focusing solely on dirty drivers, many insurers have a significant blind spot. It’s not just about the dirty drivers; it’s also about the clean drivers. Insurers should also be asking: When I think a driver is clean, how confident am I in that assessment? 

In other words, when I think I can clear a driver, is that a confident clear?

Why confident clears matter

Not all clears are created equally. Insurers should trust their violation strategy to accurately differentiate between clean and dirty drivers. Going one level deeper, insurers should feel confident their approach is using the most robust, accurate and high-quality data assets available to make that differentiation.

Without a confident clear, it’s hard to be decisive. Instead of acting with confidence, you may doubt yourself. And with good reason. There can be significant implications for incorrectly classifying a dirty driver as clean: 

• Missed premium opportunities. Without a complete understanding of risk, it’s difficult to maintain price to risk. You may provide that driver with a more favorable underwriting tier or premium than they should receive, leaving money on the table.
• Covering hidden risks. Most insurers are unlikely to order as many data assets on a clean driver as they would a dirty driver. Incorrectly believing a driver is clean may result in your inadvertently covering hidden, additional risks. 

Once that dirty driver is on your books, they don’t get much cleaner. For example, in our analysis of 363 million drivers, we looked at claims experience for the subsequent 12-month increments after new business underwriting. While violation rates improve slightly as policies mature, they still carry meaningful frequency. 

What’s more, inadvertently retaining customers with violations can be pricey. For example, our research found that tenured customers with violations:

• Have a consistent rate of violations, which is a strong indication of risk
• Perform as if they were new customers with violations
• Have a loss cost almost twice that of drivers with no violations

Assumptions at new business can also propagate to the renewal book of business, which makes up the majority of personal insurers’ book of business. Our research found that >6% of renewing drivers have one or more violations each year—which translates into a 93% increase in claims dollars.

In other words, if you believe drivers to be clear but they aren’t, that has material effects on your bottom line. Zooming out, that could negatively impact the health of your book of business. 

How to get a confident clear

What’s the key to achieving a confident clear, and being able to optimize underwriting expense and underwriting effectiveness? Using the most robust, highest quality data assets available.

For example, LexisNexis® Driving Behavior 360 uncovers more violations than a traditional motor vehicle record (MVR) by supplementing MVR data with court data. The solution can uncover:

• 14% more violations than just referring to an MVR
• 4% more DUIs
• 17% more major driving violations
• 79% more minor driving violations

The breadth of our data assets means we see virtually some component of every auto insurance quote. That allows us to leverage broad set of diverse data assets to provide insurers with the most value—and the highest level of confidence.

Now that’s what I call a confident clear.

What to do next

• Learn why court records plus MVR are platinum standard for risk assessment in U.S. personal auto lines.
• Download our white paper on how driving behavior has changed post-COVID. If you’re still underwriting like it’s 2019, you may be missing opportunities to capture additional premiums.
• Uncover more violations than a standard motor vehicle record (MVR) search with LexisNexis® Driving Behavior 360.