Luxury sports cars obviously aren't built for hauling hay on the farm, yet some of their owners are claiming them as farm vehicles on car insurance applications, according to a new study by Quality Planning, an insurance analytics firm in San Francisco.
It's a new twist to the old problem of car insurance fraud--fudging information to get discounts. Many car insurance companies offer farm-use discounts, up to 20 percent, to people using their vehicles exclusively on a farm where the chances of collision or theft are lower compared to use in urban areas. Insurance companies lose $150 million a year from the misapplication of the farm-use discount alone, according to Quality Planning.
Misuse of the farm-use car insurance discount
In an analysis of 80,000 vehicles for which the farm-use discount was claimed in 2010, Quality Planning uncovered examples of such unsuitable vehicles as the BMW Z4, Cadillac XLR, Jaguar XJ6, Mercedes SL550 and Porsche Carrera. Unlikely farming locations included Brooklyn, Houston, San Francisco, Scottsdale and even the nation's capital. Of the sample, 6,382 vehicles (8 percent) were garaged in ZIP codes where, according to the 2000 census survey, less than 1 percent of the population engaged in agriculture.
The average annual premium in urban areas was $608, compared with $446 for farm-use vehicles in non-urban areas. The difference in rates acts as an incentive for policyholders and, oftentimes their insurance agents, to seek creative discounts, according to Quality Planning.
Of the vehicles in the study, less than 1 percent were sports cars or vans; about 1.5 percent were coupes, and 3 percent were minivans. Pickup trucks comprised 71 percent of the vehicles, followed by sedans, 14 percent, and sport utility vehicles, 10 percent.
Rating errors, such as the misapplication of the farm-use discount, raise car insurance rates for other drivers.
"Honest people end up subsidizing the insurance premiums of dishonest people, and careful drivers subsidize high-risk drivers," Quality Planning Senior Vice President Robert U'Ren said in a statement. "And in a very real sense, our farmers are subsidizing unscrupulous city dwellers."