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Life Health > Life Insurance > Permanent Life Insurance

Motor Vehicle Records Data and Life Insurance

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What You Need to Know

  • Some violations may not mean much.
  • Just one major violation correlates with a big increase in mortality risk.
  • A bad driving record correlates with a big increase in mortality risk from all causes, not just from motor vehicle accidents.

In light of the COVID-19 pandemic, consumers — especially those under 45 — are in a heightened state of awareness with regard to their own mortality.

According to a survey conducted in May 2020 and June 2020 by Life Happens, 67% of Americans say that the pandemic has been a wake-up call for them to reevaluate their finances, and 30% say that life insurance has been one of the top topics that have dominated dinner-table discussions.

That’s good news for life insurers.

Against that backdrop, the proportion of younger buyers of life insurance has increased over the past two years, according to a recent Aite-Novarica study, which analyzed the life insurance buying experience of 506 consumers ages 18 and older.

That same study reveals that 76% of those surveyed used an agent-assisted online or direct online process to buy their policies.

As younger, tech-savvy consumers have increasingly completed their purchasing online, many life insurers have seized this opportunity to update and redesign their application and underwriting processes.

With the automation of insurance workflows here to stay, can carriers properly assess risk without adding too much friction to the customer experience for the consumer and their agent? A key part of the answer is data.

So where do motor vehicle records (MVRs), and the data they contain, fit into the equation?

MVRs Help Create Clarity in Automated Life Insurance Workflows

Life Insurers must understand all factors that impact mortality and how much their client will pay for a policy.

Beyond height, weight and general health, insurers also consider behavioral attributes or data that have demonstratable impacts on mortality.

We know in evaluating mortality risk that if an individual smokes or has diabetes, they are at a higher risk of premature death than non-smokers and those without chronic health conditions.

But what might be some less obvious signs of increased risk for mortality?

One important yet sometimes overlooked characteristic is driving behavior.

If an agent knows a client has been cited for driving under the influence (DUI), multiple speeding tickets or other significant violations, these risky behaviors correlate to a much higher premium.

What’s more, the applicant might even be declined altogether because of the link between the risky driving behavior and mortality.

Underwriters use this information to help decide how to classify risk, and it should help agents set clear expectations for consumers during the application process, because one of the most reliable sources for determining risk is MVRs.

MVRs were developed to track driving history, to ensure that roads are safe from those who exhibit bad decisions behind the wheel.

Multiple violations can lead to suspension of driving privileges or revocation of an individual’s driver’s license.

Auto insurance companies originally began using this information during underwriting to set premium rates, providing a snapshot of behavior that can directly impact risk.

In the auto insurance world, it is straightforward; more violations and accidents mean an individual is exhibiting risky behavior that is likely to cause an auto claim.

When you apply this logic to life insurance, there is often a deeper meaning to the information that provides insight into how much risk an individual is willing to take with their life decisions.

For example, if an individual is speeding because of something largely outside of their control, like rushing a woman in labor to the hospital, the impact is likely negligible, even though speeding is never a good idea.

But if someone has multiple speeding violations, and some of those are for exceeding the speed limit by a significant amount — generally 25 miles per hour or more — then underwriters might wonder what decisions the individual makes outside the vehicle that could impact his or her mortality.

If the individual incurs a major infraction like DUI, an underwriter is likely to question the individual’s health and lifestyle choices.

Multiple DUIs are more than just a red flag; they could lead to uninsurability.

Hannover Re published a whitepaper some years back that highlights how each violation can impact mortality.

The study shows that just one major violation increases the overall mortality of an individual by 51% over people of a similar age with clean driving records or minor violations.

And individuals with violations do not necessarily perish in auto-related events.

As a driver accrues violations, he or she increases general mortality by up to 80% compared to those of a similar age group with no violations, according to the report.

What Does All This Mean for Consumers?

To qualify for the lowest rates at most life carriers, a proposed insured needs to have a good driving history: no major violations like DUI, reckless driving charges, or suspension/revocation of license.

Some insurers even have restrictions when there are more routine violations, like speeding.

When individuals do have one of the above-referenced infractions, they can expect to pay more through premiums or flat extras.

For major violations like a DUI, a proposed could be declined or have the application postponed until the driving record is more favorable.

The bottom line is that a bad driving record brings a higher risk of early death.

Risky driving behavior must be accounted for when deciding how to classify and price risk.

The more an advisor understands this element of underwriting, the better you will be at communicating expectations to your clients.

Michael MabeeMichael Mabee is director, life insurance, at LexisNexis Risk Solutions.





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