The increasing complexity of vehicle configurations combined with a volatile used car market is presenting significant challenges for auto insurance companies. According to a recent report by J.D. Power, the shift from traditional mechanical systems to software-defined architectures has led to over 600,000 unique vehicle configurations sold in North America during the 2025 model year alone. This diversity complicates accurate valuation and underwriting for insurers.
One example highlighted is the Ford F-150 pickup truck, which currently offers more than 100,000 unique build configurations. Vehicles with the same year, make, model, and trim can differ widely in price due to factory-installed options and custom features. For instance, a 2024 Ford F-150 Lariat 4WD SuperCrew with a standard 5.5-foot bed might sell for around $69,630, while a fully loaded version of the same vehicle could reach $84,465. This variability creates a blind spot for insurers who often rely on shortened Vehicle Identification Numbers (VINs) that do not capture detailed configuration data.
Insurers typically use a truncated VIN, sometimes called a “squish VIN,” which provides only basic information such as the vehicle’s year, make, model, and sometimes trim level. However, this limited data prevents them from accurately assessing the full replacement value of a vehicle. The report warns that actuarial models based on incomplete VIN data could misestimate values by up to $15,000 per vehicle. This gap directly impacts insurance pricing and claims management.
Adding to these challenges is the significant rise in used vehicle prices over recent years. The average retail price for used cars has increased by more than 20% in the past five years, now averaging $29,488 due to supply shortages caused by the pandemic. Insurers usually estimate depreciation at about 20% annually, but these market changes have disrupted that assumption. Electric vehicles (EVs), which depreciate faster than average cars, further complicate valuation models.
The combination of complex vehicle builds and rising used car prices means insurers face difficulties aligning premiums with actual risk. To adapt, they need access to full 17-digit VIN data along with original equipment manufacturer (OEM) build details and real-time valuation insights. Such detailed information would enable insurers to develop more accurate underwriting models and improve claims severity forecasts.
J.D. Power’s analysis draws on extensive market data and proprietary tools like the StudyPrice 2.0, which decodes full VINs to reflect exact vehicle build profiles. Experts say that leveraging these advanced resources is essential for insurers to keep pace with evolving automotive technology and market dynamics.
Overall, the report underscores how the rapidly changing landscape of vehicle customization and used car pricing poses significant hurdles for auto underwriters. Without improved access to detailed vehicle information and updated valuation methods, insurers risk facing larger financial uncertainties in their portfolios.
