Your Driving Record: Insurance Companies’ Crystal Ball

Insurance, Life Insurance
Your Driving Record: Insurance Companies’ Crystal Ball

You look at your driving record and see speeding tickets, an accident, maybe a DUI, and chalk everything up to dumb mistakes or bad luck behind the wheel.

But insurance companies see clues about how you manage your life — and even about when you’ll die.

“Motor vehicle records give insight into how folks behave,” says Karen Phelan, senior director of life Insurance for LexisNexis Risk Solutions, a data analytics company in Atlanta.

Driving records have long played a big role when comparing car insurance rates. But predictive analytics is offering new insight using driving history.

» MORE: How much car insurance rates rise after an accident or violation

Using driving records to price life insurance

LexisNexis uses motor vehicle records and other publicly available data in its software tool for evaluating life insurance applicants. The tool’s algorithm produces a score based on the data for each applicant. Life insurance companies can use the scores to help price policies.

When combined with information about medications that applicants take — which can be purchased from prescription-data providers — the tool’s results can eliminate the need for life insurance medical exams in many cases, Phelan says. That means you can apply for life insurance and get coverage quickly, without giving a blood or urine sample.

“When you’re assessing an individual for life insurance in their 20s, 30s, 40s or even 50s, they might not have a lot of relevant medical history,” Phelan says.

Driving records can fill in the blanks before lifestyle habits have had a chance to impact health.

» MORE: How to clear your driving record to save on car insurance

Moving violations and correlations

LexisNexis and RGA Reinsurance Co. found that driving records can help predict someone’s risk of dying at any point from any cause, not just from car accidents. The researchers examined 7.4 million motor vehicle records from 2006 to 2010 and cross-referenced those with death records from 2007 to 2010. About 73,000 of the drivers died within the study period.

“We see all violations having relevance,” Phelan says. “Sometimes it’s not the violations themselves, but [having] a high number of them.”

Some of the findings within the study period:

  • People with serious violations, such as a DUI, reckless driving or speeding 30 mph or more above the limit, had a 71% higher death rate than people of the same age with clean driving records or only minor violations.
  • For women, one serious violation doubled the death rate. For men, one serious violation increased the death rate by 61%.
  • People with two to five violations of any kind had a 24% higher death rate.
  • Six or more violations of any kind on a driving record boosted the death rate by 79%.
  • The trends were consistent for all ages.

A similar study published in 2016 by global reinsurer Hannover Re found that DUIs were a stronger predictor of higher death rates (from any cause) than any other traffic violation. Next up were driver license suspensions or revocations, followed by reckless or negligent driving, speeding and car accidents. The extra death risk linked to speeding tickets depended on how much drivers exceeded the speed limits.

Life insurers have expanded their use of driving records in the last five years, and some insurers now use them to evaluate applicants regardless of age or the coverage amount, Phelan says. Ten years ago, insurers typically checked motor vehicle records only for people buying large policies.

» MORE: When to file a car insurance claim, and when not to

Your driving record and home insurance

Allstate, meanwhile, is using driving records to help price home insurance. The company began doing so in 2011 in Oklahoma with the introduction of a policy called House & Home, which included changes in coverage as well as pricing. The product is available in 37 states.

Home insurance prices are based mostly on a home’s reconstruction cost and location. Allstate started looking at driving records to learn about homeowners’ behavior, says Laurie Pellouchoud, vice president of product operations in Allstate’s home insurance unit.

Behavior is important: Poor home maintenance or careless security can lead to damage and home insurance claims. Insurers don’t have to explain why certain behavior leads to claims. They only have to show a correlation between the variables and claims.

TransUnion provides insurers with court record data to help price home insurance. A 2016 study by the credit bureau recommended that insurers consider both traffic and criminal violations for all household members because of the strong tie between violations and home insurance claims.

Mark McElroy, executive vice president of TransUnion’s insurance business unit, says that among traffic violations, serious things like speeding 20 mph over the limit and DUIs are the most powerful predictors that someone will make a home insurance claim.

“But there is predictive value in minor violations like parking infractions as well,” he says.

Most home insurers don’t use driving or court records for pricing yet, says George Hosfield, senior director of home insurance for LexisNexis Risk Solutions. Getting the data costs money. For many home insurers, the predictions that can come from driving records aren’t powerful enough to justify the cost, he says.

McElroy says home insurers are seeking more sophisticated data and pricing techniques to get a competitive edge. “We believe this will continue and even accelerate over the years to come.”

Barbara Marquand is a staff writer at NerdWallet, a personal finance website. Email: bmarquand@nerdwallet.com. Twitter: @barbaramarquand.

This article was written by NerdWallet and was originally published by USA Today.