Why you shouldn’t use OBD-II dongles to verify mileage

Whether we’re looking at pay-per-mile products, usage-based pricing, or traditional policies, mileage verification plays an important role in all kinds of auto insurance products. Many insurance companies use aftermarket hardware like OBD-II dongles to verify mileage. Here’s what this hardware solution lacks and how you can use a successful software-based alternative.

Why OBD-II dongles are bad at verifying mileage

While on-board diagnostics dongles are versatile and useful for tracking and diagnostics of many kinds, they are far from ideal when it comes to mileage verification.

• Inaccuracy: It might surprise you, but on-board diagnostics dongles aren’t able to access a vehicle’s actual odometer reading. Instead, OBD dongles calculate a car’s approximate mileage information based on its location as well as the start and end of the driver’s trips. As you can imagine, inferring mileage from location and trips comes with inevitable inaccuracies. On top of that, if the dongle wrongly detects the start or end of a trip, small imprecisions can turn into significant errors.
• Inconvenience and unintentional failure: OBD-II dongles, like all hardware devices, require to be correctly installed and used. Policyholders have to wait for a package in the mail and spend time installing the device in their vehicle. This lengthy onboarding process will cause many prospects to drop off, if it doesn’t discourage them from requesting a quote in the first place. Once installed, devices can easily fail due to a loose connection or if customers accidentally knock them out of place. Finally, OBD dongles can draw too much power and cause a customer’s car battery to die.
• Intentional tamper: Beyond the risk of incorrect installation and unintentional failure, some customers will deliberately commit mileage fraud. Policyholders might unplug their device before going on a long trip, and your product will take some time to detect the tamper. By the time your customer re-installs the dongle, they might have driven 10 miles or 500 miles. In hindsight, you won’t be able to determine this number, let alone the amount of premium leakage caused to your company.
• Privacy concerns: As consumer privacy is becoming an increasingly pressing issue, insurance companies have a hard time gaining their customers’ trust. Policyholders are skeptical towards constant tracking, and with good cause. OBD devices are essentially black boxes that provide little transparency about the kind of information they collect, how it gets passed on to the insurance company, and how it is being used.
• High expenses: Finally, OBD-II dongles are a significant cost factor. Your business will have to purchase OBD devices, ship them to policyholders, and replace them in case of damage or loss. If customers switch to a different insurance provider before your business has recovered the initial hardware cost, your profits will be dropping, not rising.

Why APIs are great at verifying mileage

As cars are becoming increasingly internet-connected, we don’t always have to depend on hardware to do the things that matter most. Smartcar is only one example of a pure software alternative that uses API technology to offer the perfect mileage verification solution to auto insurance companies.

• Accurate: APIs return a car’s real odometer reading — not an estimate of how far the vehicle has travelled based on trips and location. Your business will be able to finally provide precise pricing and underwriting, while your customers will never again complain about inaccurately reported mileage.
• Easy to use and reliable: Smartcar’s onboarding process takes just a few clicks from any mobile or web app. Customers will no longer have to wait to receive a device in the mail. They won’t have to install any hardware in their vehicle, but will simply log into their existing car account and accept a list of permissions. Once that’s done, customers won’t need to worry about incorrect installations, loose connections, or dead car batteries.
• Tamper-resistant: With a pure software solution, your insurance product will be able to read a car’s actual odometer regularly and automatically. Customers won’t be able to commit mileage fraud, because they won’t be able to hide or rig any information. This way, you won’t ever need to worry about lost profits from premium leakage again.
• Privacy first: Our onboarding flow with granular permissions puts transparency and user privacy first. Customers will see exactly which information your insurance app is asking for (e.g. a vehicle’s odometer, location, or fuel tank level). With the push of a button, they can choose to accept or deny this list of permissions.
• Cost efficient: Smartcar offers simple SaaS pricing that scales and adjusts to your needs. You won’t spend time and money on hardware devices, shipping, replacements, and repairs. Instead, your company will be able to save up and spend more time on the important thing: building incredible insurance experiences for your customers.

This is why and how software solutions make verifying mileage successful and easy for your insurance company. Have any questions about Smartcar or would like to request a demo? Please don’t hesitate to reach out to us. We’re happy to help!

Originally published at https://smartcar.com on September 3, 2019.