Mileage verification is crucial in the auto insurance industry, impacting everything from pay-per-mile insurance products to usage-based pricing and traditional policies. For years, companies have relied on hardware solutions like OBD-II dongles to track vehicle mileage. However, these devices present several shortcomings. As a content creator for carscannertool.store and an expert in auto repair, I will explore whether a car diagnostic tool can accurately provide odometer readings and discuss why software-based API solutions are emerging as a superior alternative to OBD-II dongles for precise mileage verification.
The Pitfalls of OBD-II Dongles in Mileage Verification
While on-board diagnostics (OBD) dongles are helpful tools for vehicle tracking and identifying mechanical issues, they are not the ideal solution when it comes to verifying a car’s odometer reading for insurance purposes. Here’s why:
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Mileage Inaccuracy: It might be surprising to learn that OBD-II dongles typically do not directly access a vehicle’s actual odometer. Instead, these dongles estimate mileage by calculating the approximate distance traveled based on GPS location data and trip start and end points. This method is inherently prone to inaccuracies. Factors like GPS signal variability, urban canyons, or even brief signal losses can lead to miscalculations. Furthermore, if the dongle incorrectly registers the beginning or end of a journey, even minor discrepancies can quickly escalate into significant mileage errors. This can result in inaccurate insurance premiums and disputes between insurers and policyholders.
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Inconvenience and Potential for Failure: OBD-II dongles, being hardware devices, require physical installation and are susceptible to real-world issues. Policyholders must wait for the device to be shipped, then spend time figuring out how to properly install it in their vehicle’s OBD-II port. This cumbersome onboarding process can deter potential customers and even discourage them from seeking a quote in the first place. Once installed, dongles are vulnerable to accidental dislodging, loose connections, or even hardware malfunctions. Additionally, some OBD-II devices can draw excessive power from the vehicle’s battery, potentially leading to battery drain, especially in vehicles driven infrequently. These reliability issues can disrupt the mileage tracking process and create frustration for both the insurance provider and the customer.
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Vulnerability to Intentional Tampering and Mileage Fraud: Beyond unintentional failures, OBD-II dongles are susceptible to deliberate manipulation by policyholders seeking to commit mileage fraud. A policyholder could simply unplug the device before undertaking a long trip to underreport their actual mileage. While systems may be in place to detect tampering, there will inevitably be a delay. By the time the system flags the missing dongle and the customer reconnects it, a significant number of unrecorded miles could have been driven – potentially hundreds. This makes it challenging, if not impossible, to accurately determine the true mileage driven during the period of disconnection and quantify the resulting premium leakage for the insurance company.
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Privacy and Data Security Concerns: In an age of heightened awareness regarding data privacy, consumers are increasingly wary of constant tracking. OBD-II dongles, often perceived as “black boxes,” raise privacy concerns among policyholders. There is a lack of transparency regarding the specific types of data these devices collect, how this data is transmitted to the insurance company, and how it is ultimately utilized. This opacity can erode customer trust and create resistance to usage-based insurance models that rely on such devices. Customers are rightly concerned about the potential for misuse of their driving data and the security of their personal information.
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High Costs and Logistical Overhead: Implementing OBD-II dongle programs involves substantial upfront and ongoing costs. Insurance companies must purchase the devices in bulk, manage inventory, handle shipping logistics to policyholders, and deal with device replacements due to damage, loss, or malfunction. Furthermore, if a customer switches to a different insurance provider before the initial hardware costs are recouped, it represents a direct financial loss for the company. These expenses significantly impact the overall cost-effectiveness of OBD-II dongle based mileage verification solutions, diminishing potential profit margins.
APIs: An Efficient and Accurate Alternative for Mileage Verification
As modern vehicles become increasingly connected, software-based Application Programming Interfaces (APIs) are emerging as a powerful and efficient alternative to hardware-dependent solutions like OBD-II dongles. Companies like Smartcar are pioneering the use of APIs to provide superior mileage verification solutions for the auto insurance industry.
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Precise Odometer Readings: Car APIs offer a significant advantage by directly accessing a vehicle’s actual odometer reading. Unlike OBD-II dongles that estimate mileage, APIs retrieve the precise mileage as recorded by the car’s internal systems. This eliminates the inaccuracies inherent in estimation methods and ensures that insurance pricing and underwriting are based on factual data. Customers also benefit from this accuracy, as they can be confident that their premiums are calculated based on their vehicle’s true mileage, minimizing disputes and fostering trust.
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Seamless User Experience and Enhanced Reliability: API-based mileage verification offers a vastly improved user experience. The onboarding process is streamlined and user-friendly, typically requiring just a few clicks within a mobile or web application. Customers no longer need to wait for device shipments or struggle with physical installation in their vehicles. Instead, they simply connect their existing car account credentials and grant permission for the insurance application to access the necessary data. This eliminates the potential for installation errors, device malfunctions, loose connections, and battery drain issues associated with OBD-II dongles. The result is a more reliable and hassle-free experience for policyholders.
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Tamper-Proof and Fraud-Resistant: Car APIs provide a robust and tamper-resistant method for mileage verification. Insurance applications can be designed to regularly and automatically retrieve a vehicle’s odometer reading at predetermined intervals. This continuous and automated data collection makes it virtually impossible for policyholders to manipulate or falsify mileage information. The real-time access to odometer data eliminates the window of opportunity for mileage fraud that exists with OBD-II dongles. This enhanced security protects insurance companies from premium leakage and ensures fair pricing for all customers.
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Prioritizing Data Privacy and Transparency: API-based solutions can be designed with a strong focus on user privacy and data transparency. Modern API platforms often incorporate granular permission systems, allowing customers to see precisely what data an insurance application is requesting (e.g., odometer reading, vehicle location, fuel level). Customers have the control to review and explicitly authorize or deny each data access permission. This transparency builds trust and empowers users to manage their data sharing preferences, addressing the privacy concerns associated with less transparent hardware solutions.
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Cost-Effective and Scalable Solution: API platforms typically operate on a Software-as-a-Service (SaaS) model, offering predictable and scalable pricing structures. Insurance companies avoid the significant capital expenditures and logistical complexities associated with purchasing, distributing, and managing OBD-II dongles. API solutions eliminate hardware costs, shipping expenses, replacement fees, and the administrative burden of device management. This cost-efficiency allows insurance providers to allocate resources more strategically, focusing on improving customer service and developing innovative insurance products. The scalability of API platforms also ensures they can readily adapt to the growing needs of the business without incurring proportional hardware-related expenses.
Embracing the Future of Mileage Verification with Car APIs
The limitations of OBD-II dongles for accurate and reliable odometer reading are becoming increasingly apparent. Car APIs offer a modern, software-driven approach that overcomes these challenges, providing a more accurate, user-friendly, secure, and cost-effective solution for mileage verification in the auto insurance industry. As vehicle connectivity advances, APIs represent the future of data-driven insurance products, enabling fairer pricing, enhanced customer experiences, and reduced operational costs. For insurance companies seeking to optimize their mileage verification processes and leverage the power of connected car data, exploring API solutions is a crucial step forward.
To learn more about how car APIs can revolutionize your mileage verification process, request a demo of the Smartcar platform today.
