For many auto dealerships, insurance verification is a one-time, albeit time-consuming, step in the auto sales process. However, for those in leasing or financing, verifying insurance isn’t just a one-time task– it’s an ongoing responsibility to ensure that your assets stay protected.
Unfortunately, technology in this space has been slow to develop, leaving many car sales reps and F&I offices stuck using antiquated processes that leave gaps in their protection. In some cases, even services aimed at solving this problem end up making it worse.
Where Traditional Insurance Monitoring Methods Fall Short
When it comes to keeping an eye on your borrowers’ insurance, the most common recommendation is to have them add you to their policy as additional interest. With this designation, you can receive communications directly from your customer’s insurance carrier if their policy lapses or is canceled.
However, it also includes some significant drawbacks:
Inbox overflow: Being listed as an additional interest on every tenant’s insurance policy might inundate your mailbox with notification letters you have to open and manage. It’s not solving the problem of dealing with policy cancellations, it’s just adding more work to your to-do list.
Update delays: Insurers aren’t required to mail cancellation notices to additional interests for up to 60 days in some states, which could leave your assets unprotected for a long stretch.
Potential for insufficient coverage: Most states only require that insurers send notices to additional insured for cancellations, not limit changes. You may not learn the coverages have been decreased until it’s too late.
Why insurance tracking vendors may not be enough
To resolve the issue of auto risk mitigation and address the challenges with additional interest, some dealerships hire vendors to manage their insurance tracking. However, many of these processes introduce their own challenges.
Notification delays
In order to get immediate access to consumers’ insurance updates, many tracking services require access to the office’s incoming communications. Typically, they do this by getting added as a lienholder on each customer’s policy. This allows them to sort through the letters as they come in and input the data into an online dashboard, either by hand or with a digital scanning system.
While this significantly reduces the operational burden of document management and data input, it still leaves several problems unaddressed. Since they rely on the reception of additional interest letters, these services are subject to the same delays– sometimes even more.
From the time a driver cancels their insurance, the carrier processes the change and sends out additional interest letters, and the third-party provider opens that mail and uploads the information to your system, your team may not find out about the issue until well after 60 days past cancellation. During that time, your vehicle may be on the road uncovered, without even CPI as a backup.
Security vulnerabilities
This system also introduces a new problem of data privacy. Oftentimes, insurance tracking vendors will outsource document management– sometimes even overseas– in order to minimize labor costs.
Outsourcing document handling to external providers carries inherent risks, even under ideal circumstances. Entrusting your business correspondence to a third party introduces the possibility of mail being misplaced or misdirected during processing. This could potentially result in company documents (and customer information) falling into the wrong hands.
Since the Federal Trade Commission’s Safeguards Rule mandates that dealerships be held responsible for their vendors’ compliance, any security mishaps could come back to your business with a maximum fine of $51,744 per violation, with each exposed letter counting as a separate violation.
Unreliable sources
In some cases, insurance tracking vendors will supplement their mail processing method by pulling data from an information database. These systems offer consumer data pulled from a variety of sources, including public records, contributory databases, and vehicle data.
Unfortunately, due to the nature of the origin of public record information, the public records and commercially available data sources used in reports may contain errors. Source data is sometimes reported or entered inaccurately, processed poorly or incorrectly, and is generally not free from defect.
While this database aggregates and reports data, as provided by the public records and commercially available sources, it’s not the source of the data. Before relying on any information, it should be independently verified.
What to Look for in an Auto Insurance Monitoring Solution
Given the complexities of the auto insurance industry, it’s unsurprising that many dealerships end up turning to less-than-ideal methods for tracking customers’ protection. Between privacy-focused regulations and sluggish tech adoption in the insurance verification process, monitoring auto coverage is a difficult undertaking.
That’s why it’s important to vet each solution carefully to make sure it fits your needs. Here are a few key features to look for when assessing your options.
Real-time information from the source
While many third-party vendors promise to reduce the cost burden of managing additional interest letters, some will do this by routing that mail to another office where their team can sort through them. This manual process can lead to extended delays and clerical errors.
Other database-focused solutions pull down policy cancellations from centralized servers that collect information directly from carriers. However, this data can be updated infrequently, or even not at all. You could be left in the dark if a customer cancels their policy but the carrier doesn’t update the server regularly.
Instead, you’ll want to make sure your service provider is pulling information directly from the carrier, not waiting for updates. With solutions like CheckMy Driver, you can trigger insurance checks at key times in the month or when there’s an indication of concern (like a missed payment, or prior to a repo) and pull updates into your real-time dashboard. Not only does this reduce information lag, but it also protects your data integrity and compliance by inputting details securely into your system.
FTC Safeguards compliance
Effective June 9, 2023, the FTC Safeguards Rule enforces that dealerships are responsible for vetting their vendors’ security practices. That means that it’s up to you to make sure that your tracking provider is handling your customers’ personally identifiable information (PII) responsibly.
According to the organization’s guidelines, “Your contracts must spell out your security expectations, build in ways to monitor your service provider’s work, and provide for periodic reassessments of their suitability for the job.”
You’ll want to discuss these requirements with any third-party providers before signing an agreement to ensure that they’re equipped to follow them. It can also help to look for a service partner with existing certifications, such as SOC 2 compliance.
Automated risk mitigation
When it comes to monitoring your customers’ insurance, getting timely updates is only the first step. Then, once you know that a driver’s policy is canceled, you need to take action to make sure it’s reactivated.
Some third-party providers will only get you halfway. In many cases, they won’t even alert you to the problem– they’ll just notify you when the data is ready. From there, you’re left to review the findings for any coverage changes or cancellations, placing CPI as a backup in the meantime. However, more robust solutions like CheckMy Driver will automatically prompt your driver to reinstate insurance as soon as a cancellation or lapse is detected while CPI fills in the gaps.
Start Running Real-Time Monitoring
Ready to step up your insurance monitoring game? Learn more about how CheckMy Driver can help you ensure that your customers stay covered from contract signing to payoff.
With its award-winning technology, CheckMy Driver provides automated insurance monitoring directly from the source. It periodically pulls your customer’s insurance policy straight from the carrier, analyzes the documents to ensure it’s accurate and adequate, and alerts you in real-time if there’s a cancellation or policy change.