Hogwash: Farm-Use Discount For City-Driven Luxury Cars

NU Online News Service, May 27, 10:30 a.m. EDT

There are probably no farms in Brooklyn, N.Y., and it is unlikely a Jaguar is being used to haul animal feed.

A new study reveals many vehicle owners claiming a discount for farm use are giving insurers a load of horse manure.

Cars clearly not meant for farm duties and owned by people living in urban areas are fraudulently getting farm-use discounts of up to 20 percent offered by many insurance companies, according to Quality Planning.

A subsidiary of Verisk Analytics that verifies policyholder data for insurers, Quality Planning looked at about 80,000 vehicles getting a farm-use discount in 2010 and used geocoding to determine if owners lived in urban or rural areas, and if there was farming in the vicinity.

What the San Francisco-based company found was that about 8 percent of cars getting the discount where garaged in places not engaged in agriculture. Makes of cars receiving the savings—meant for vehicles used exclusively on a farm—included BMW, Cadillac, Jaguar, Mercedes and Porsche.

“In some cases the type of vehicle employed…would seem rather unsuitable for farming,” Quality Planning says.

The fraud is costing insurers about $150 million each year, concludes Robert U’Ren, senior vice president of Quality Planning.

“Misapplication of the farm-use discount is one of a number of frauds perpetrated on insurance companies by dishonest policyholders and their agents,” says U’Ren in a statement.

Claiming farm-use is basically done on the honor system. The use is seldom verified, so it is an easy way to cheat an auto insurer, says Quality Planning.