J.D. Power: Vehicle complexity, strong used-vehicle market ‘wreak havoc’ on auto insurance valuation models

A new Insurance Intelligence Report from J.D. Power has found that auto insurance actuarial models built on incomplete vehicle identification data due to individual customizations could be off by nearly $15,000 per vehicle.

From advanced driver assistance systems (ADAS) and upgraded powertrains to premium interiors and specialty paint packages, two vehicles with the same year, make, model, and trim can have vastly different original values, the report states.

For example, in the large pickup truck segment, the Ford F-150 currently has 100,000 unique build configurations and, market-wide, more than 600,000 unique vehicle configurations were sold in the U.S. in the last year alone, according to J.D. Power data.

“While this level of customization has benefited consumers and automakers, it has created a growing challenge for auto insurers,” J.D. Power states. “Many actuarial models used to price and underwrite policies still rely on simplified vehicle identification data that cannot fully capture the configuration and replacement value of modern vehicles. At the same time, volatility in used-vehicle pricing and rising repair costs are further complicating valuation models that were built for a far more predictable market.

“This combination of vehicle complexity and market volatility is creating a widening gap between the values insurers assume during underwriting and the costs they ultimately face when repairing or replacing vehicles after a claim.”

Without having the full 17-digit VIN, as vehicle configuration complexity continues to increase, reliance on simplified vehicle identification methods can introduce significant pricing inaccuracies into underwriting models, the report states.

The data notes that average used-vehicle retail prices have risen 20% in the past five years, as vehicle configuration complexity has increased exponentially over the last 10 years.

“Traditional valuation models have long relied on the assumption that most mass-market vehicles depreciate roughly 20% per year,” the report states. “However, recent market dynamics have disrupted those historical depreciation patterns.”

It adds that another major factor complicating insurance valuation models is the rapid expansion of vehicle technology.

Even minor accidents can require expensive sensor replacements and complex recalibration procedures.

“Accurately modeling this risk requires insurers to know precisely which safety technologies are installed on each vehicle they insure,” the report states. “Without accurate, detailed VIN-level configuration data, insurers may not have visibility into which vehicles contain these systems and which do not — introducing further uncertainty into repair cost projections.”

And as the use of artificial intelligence rises in insurance underwriting, claims handling, and pricing, J.D. Power says the importance of accurate foundational data becomes even greater.

“For an insurer, moving from generic VIN decoding to precise, configuration-level data transforms the business from reactive to surgical,” the report states. “As vehicles have become ‘computers on wheels,’ with significant price variations, knowing the exact build data — not just the year, make, and model — is the difference between profitability and a loss ratio spike.”

In January, J.D. Power reported that after five years of unprecedented volatility, insurers were beginning to see the consequences of gradual but consistent premium hikes.

It found that the percentage of customers who shopped for auto insurance hit a record high of 57% in 2025, up from 49% in 2024.

According to CCC’s Crash Course 2026, inflation, interest rates, and economic uncertainty pressures persist post-pandemic, causing consumer financial strain that has led to affordability challenges that influence whether consumers will maintain full coverage, scale back protections, or even drop insurance, the report says.

The report points to a Guardian Service survey conducted in Q2 2025, which found that 35% of consumers delayed or canceled plans to purchase home insurance, car insurance, or both.

While 77% view car insurance as a necessity, nearly 1 in 4 people downgraded or dropped insurance. Another 1 in 3 said they would temporarily go without insurance to free up funds.

As for vehicle sales, the report quotes data from the St. Louis Federal Reserve, which found new light vehicle sales increased by 2.4% in 2025, with more than 16.2 million vehicles sold. It adds that this is the highest volume post-pandemic.

Multiple data sources show that the price of new vehicles increased in 2025, with the average transaction price (ATP) exceeding $50,000 for the first time in September.

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