Unfortunately, auto insurers can’t always count on people being honest with them. There are a variety of policyholder lies such companies could be exposed to. Among the things that could tempt a policyholder to be dishonest with their insurer is the prospect of gaining some sort of financial advantage by lying.
For example, a person might be tempted to be dishonest in an auto insurance claim they filed to try to increase the likelihood of the claim being approved or increase the amount of the claim.
Also, individuals might be tempted to keep certain information from their insurer to try to keep their auto insurance rates down. There are a variety of things insurers might factor in when determining what premium level to charge a policyholder. Among these is how many miles a person regularly drives.
Currently, insurers mostly rely on drivers to self-report how much in miles they typically drive. Higher mileage levels can lead to rate increases, sometimes fairly big ones. Given this, some individuals might be tempted to lie about their mileage level on their initial insurance application or “forget” to tell their insurer when changes happen in their driving habits that lead to them having much higher mileage levels.
So, under the current prevalent system of policyholders self-reporting mileage, insurers can face the possibility of being subjected to lies related to mileage levels. Might technology eventually save the day for insurers on this issue? Some companies have been encouraging their policyholders to use certain data-gathering devices in their cars. Among the things such devices can provide insurers with is a mileage count. One wonders if use of these devices will one day be widespread and, if this happens, what this will end up meaning for how accurate of information insurers typically have when it comes to the mileage levels of their policyholders.
Complex legal issues can come up for auto insurance companies when they discover that a policyholder lied to them. Such a discovery sometimes leads to an insurer denying a claim. Sometimes, such denials are challenged. Skilled insurance law attorneys can assist insurers with navigating disputes that come up over claims that were denied due to policyholder dishonesty.
Source: CBS MoneyWatch, “Auto insurers put your mileage under a microscope,” Ed Leefeldt, Aug. 25, 2017