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Vehicle customization is wreaking havoc on auto insurance valuation models, according to a new JD Power report.
Vehicle customization has skyrocketed in recent years as automakers have shifted from mechanical systems to "software-defined" architectures. Market-wide, more than 600,000 unique vehicle configurations were sold in the United States in the last year, according to JD Power data.
For example, a Ford F-150 currently has more than 100,000 possible unique build configurations. A 2024 Ford F-150 Lariat 4WD SuperCrew with a 5.5-foot bed would have sold for $69,630 with standard options, but the same vehicle with full options would have sold for $84,465.
That level of customization is creating challenges for auto insurers. Most actuarial models still use simplified vehicle identification data that might not reflect the vehicle's actual replacement value. Actuarial models that use incomplete vehicle identification data could be off by more than $15,000 per vehicle, the report found.
At the same time, volatility in the used-vehicle market and rising repair costs are also complicating factors, creating a widening gap between values assumed at underwriting and actual repair and replacement costs.
The report found that access to full 17-digit VIN configuration data, OEM build information, real-time vehicle valuation insights and feature-level vehicle attributes would help insurers improve underwriting accuracy.
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