I grew up in a small, hilly, heavily wooded town. Every blind curve and ditch, of which there were many, had one or more sad stories of bad car accidents that had occurred over the years. Luckily for me (though perhaps not for my parents) I didn’t have to worry about how those narrow, windy roads translated in terms of car insurance premiums, since I wasn’t paying for my own insurance until I had moved to a flatter town with much wider, friendlier roads. By that time though I could well appreciate that different geographic areas (or “territories”, if you will) experience different rates of loss, and the relative frequency and severity of the car insurance claims can vary greatly from territory to territory.
However, the territory underwriting factor can be easily mis-rated. Having moved around multiple times since college, I am intimately familiar with the hassles of keeping my current address up-to-date. I have had many acquaintances who, after updating so many other accounts with their new addresses, couldn’t be bothered or didn’t realize the necessity of updating the garaging addresses for their personal vehicles. And in this age of paperless billing it’s hardly even required to
update one’s mailing address anymore, so not even that incentive remains. But as my former college buddies moved off to big cities, without an updated garaging address they weren’t paying the correct amount for the added risk of keeping their cars in a city. And any claims they filed would still be counted towards the old territory still listed on their policy. This bad data has the potential to affect future rates, which can confound an insurance carrier whose goal is set up its rates as accurately as possible.
Thankfully, it’s really quite easy to get these addresses updated. For every time I’ve moved, the accounts and addresses that were quickly updated were from the companies and services that took that little bit of extra effort to reach out to me and make sure my information in their system was current. For the companies that I rarely heard from it took many months, if not years, longer for me to get around to updating my information. I’m sure there are people out there who are really good about keeping all of their information current all of the time, and I admire them. But I also know that there are many people like me, and I know that I appreciate the companies that take the time to contact me. I hope they, in turn, appreciate having as much accurate data as possible, because in the insurance world, accurate data leads to accurate pricing … a primary requisite for long-term profitability.
by Kirsten Clemmensen
just 20-something kids who can’t find work, they are also married couples with children who may have lost their job(s) and can no longer afford to live on their own.
Figure 1 above shows a typical spread of commute mileage on an insurance company’s book of business. Often the commutes are skewed toward the lower bands, which are generally associated with lower premiums. QPC uses statistical modeling to estimate more accurate commute mileages, shown in red, which can then be validated with a policyholder upon renewal. For more information on commute and the Quality Planning Rating Integrity Solution, please visit our website.
he research we do in relation to insurance, driving patterns and behavior, and premium leakage. At QPC we regularly review large amounts of private passenger auto data which is then used to create models, make predictions, improve rating error detection, and much, much more. Additionally, QPC employs many smart people with different areas of expertise who are anxious to share their business insights with you. So, you can also expect posts and commentary on more general business practices on subjects ranging from customer service to IT best practices.