In August 2009, some vehicle history information providersstarted to share auto insurance claim data with their customers.Insurance claim data is now being released to the public. Thisinformation is shared with used car buyers and sellers throughoutNorth America. Surprisingly, many auto insurance companies did notknow this was happening and they may not have given theirauthorization. Some vehicle history information providers havetaken it upon themselves to disclose this information and to decidehow it will be shared without any insurance companyinvolvement.

“We were shocked to discover our information was being sharedwithout our knowledge,” said the assistant vice president of autophysical damage for a major insurance company. “When we discoveredwhat was happening, we took immediate steps to stop it.”

For more than 20 years, vehicle history providers have soughtauto insurance claim data. For that same length of time, insurershave consistently refused to share auto insurance claim data. Manyinsurance companies may not realize that some vehicle historyreporting companies — despite the industry's longstanding refusalto share such data — have started to include insurance claiminformation on their reports.

“Even we were surprised when we heard that other vehicle historyinformation providers were sharing insurance claim data with thepublic,” said Gerry Bayer, vice president of data at Carfax. “We'vebeen working with insurance companies for years to figure out thebest ways to share information about claims with used car shoppers.We believe it should be disclosed only with the permission ofcompanies that own it.”

Insurance companies may want to look at whether their autoinsurance claim data is being disclosed to the public. Thisinformation should only be shared with the insurance industry'spermission and involvement.

It makes sense for auto insurance providers to evaluate theircurrent position on disclosing this type of data. With the growinguse of vehicle history reports, as well as the ever increasingamount of accident and damage information being reported, it isimperative that consumers have access to information that showstheir vehicles have been repaired to the high standards insurancecompanies demand. Without this information, policyholders will beill-prepared to protect the resale value of their vehicles after anaccident.

Insurance companies that demand high-quality repairs should notbe concerned about diminished value claims due to sub-standardwork. Disclosing details about the repairs — including shopcertifications, the quality of parts used, and post-repairinspections — go a long way toward reassuring policyholders thattheir vehicles have been repaired back to pre-damage conditions.This, in turn, will help them negotiate more effectively when theylater sell or trade-in a vehicle.

Fostering Safety

Even more important than the financial benefits of disclosure,sharing this type of information helps save lives.

It was a normal Tuesday morning for Pam Schumacher. She had beenin the car for a few hours already visiting clients around suburbanDetroit and decided to grab some lunch at the mall before headingto her next appointment. She waited patiently at the light for theleft turn signal to enter the mall parking lot. The last thing sheremembers is the green arrow and the sound of her turn signal.

A vehicle traveling the opposite direction came through the redlight at approximately 35 miles per hour, barreling into theright-hand side of Pam's car. The force of the impact pushed Paminto the median and spun her back around to face oncoming traffic.Every airbag in her car deployed: Every airbag except the one thatwas supposed to protect her.

Unbeknownst to Pam or the auto insurance company that held herpolicy, the car had been in a prior accident in which the driver'sside airbag (the one in the steering wheel) had deployed. Althoughthe accident damage was repaired, for some reason, the airbag wasnever replaced. Fortunately, Pam escaped the accident with nothingmore than minor injuries, but others have not been so fortunate.This is a growing problem within the used car market and one thatvehicle history information providers are working to combat.

Unfortunately for Pam, information about the airbag deploymenthad never been reported to a vehicle history provider: Thispotentially life-saving piece of data was not disclosed to thepublic. Information about prior damage events can not only helpprotect consumers when they are purchasing vehicles but can alsohelp insurance companies make better decisions about the cars theychoose to insure. While Pam was fortunate, had things unfoldeddifferently, claims for this particular accident may have risenexponentially.

The Value of Vehicle History Data

Insurance companies can reduce the chance of underwriting theserebuilt wrecks by adding vehicle history information to theirprocess. Esurance started to add vehicle history information to itsprocess a few years ago. When a policy is being written, Esuranceaccesses vehicle history data and checks if the vehicle has a titlebrand. If the vehicle has ever been branded, then Esurance contactsthe customer to notify him that the vehicle will not be insured:This therefore protects Esurance and its customers from potentiallydangerous vehicles.

Another growing concern for insurance companies is the alarmingrise over the past year in auto insurance fraud. On September 10,2009, the National Insurance Crime Bureau (NICB) announced that thenumber of suspicious insurance claims rose 13 percent. Suspiciousauto insurance claims were up an alarming 21 percent. According tothe Insurance Research Council (IRC), insurance fraud added between$4.8 and $6.8 billion to auto insurance payments in 2007.

Ferreting Out Fraud

One way insurers can more effectively combat fraud is to consultvehicle history information. One of the most common types ofinsurance fraud involves submitting a claim for pre-existingdamage. While insurance adjusters have been trained to spotpre-existing damage when evaluating a claim, it is helpful for themto also be able to access information about previous events from acar's past. Vehicle history information providers gather data fromthousands of sources and put it all into one report. All types ofinformation can help SIU staff ferret out fraud. In addition to theobvious sources — including prior damage events from police reportsor collision repair facilities — odometer readings, servicerecords, state inspection results, and self-reported informationcan help quell fraudulent and inflated claims.

“Compiling a wealth of granular data can better help insurersuncover well-hidden auto frauds,” said Dennis Jay, executivedirector of the Coalition Against Insurance Fraud (CAIF). “Schemersdepend on secrecy. In addition to dogged legwork by investigators,detailed data are a fraud schemer's worst enemy. Insurers can tracefraud schemes to their origins, identify the ringleaders and buildstronger cases that allow prosecutors to nail downconvictions.”

In addition, vehicle history information providers are workingwith insurance companies to reduce the time and costs associatedwith recovering stolen vehicles. Most vehicles are recovered withina few days of having been stolen. For those that are not, thechances of recovery diminish exponentially. However, the recoveryrate tends to increase when insurance companies report these stolenrecords to vehicle history report providers.

The fact is that millions of people, used car dealers, andconsumers view these vehicle history reports every year. Workingclosely with the NICB, Carfax can add an alert to a vehicle'shistory report if an insurer has reported that automobile asstolen.

The face of stolen vehicles has changed over the past 20 years.Fewer cars, especially high-end vehicles, end up in chop shops, andmore are being concealed with cloned VINs. Law enforcementorganizations, especially the FBI, are working closely with vehiclehistory information providers to heighten the ability to detect andreport cases of potential VIN-cloning, thereby increasing thechances of recovering even more stolen vehicles.

It is in the collective best interest to share as muchinformation as possible to protect policyholders, insure qualityvehicles, and keep highways safe. Thus, insurers not currentlyworking with a vehicle history information provider may be losingmoney. This means that insurers could be losing money associatedwith under priced premiums, fraudulent claims, and diminished valuepayments.