Predictive Analytics

Territory / Summit Analysis

The insurer had not reviewed or adjusted their territorial boundaries in several years; and their current territories were not based upon an analysis of their underlying loss experience.

Pinnacle began with an evaluation of available insurer and external industry data at the ZIP code level as well as their current and future policy processing capabilities. After all of the experience data was adjusted to a common base level, we used our Summit® software product to smooth the data to develop an initial adjusted pure premium by ZIP code to reflect both experience in a ZIP code and in neighboring ZIP codes. The number of additional neighboring ZIP codes used was dependent upon attaining a sufficient exposure level.

The smoothed data was then clustered using Summit® on both a contiguous and non-contiguous basis. The insurer needed to decide whether to maintain relatively contiguous definitions or use more granular and theoretically accurate non-contiguous definitions. Using statistical measures, we identified and graphed optimal definition sets. Non-contiguous definitions were selected by the client. To minimize the number of territories with a limited geographic area or only a few ZIP codes, some manual combination of “outlying” ZIP codes with territories (clusters) with similar adjusted pure premiums was performed.

Finally, we assisted the insurer in developing the necessary filing support material to gain approval. The new program is generating new business in areas of historical profitability but previously less than average competiveness. 

Underwriting & Tiering Analysis

A single state auto insurance writer hired Pinnacle to address its current rating and tiering program. We removed unnecessary underwriting restrictions and more adequately priced risk classes, which allowed the insurer to experience significant, profitable growth.

When we began, the company’s existing tiering design was only based on a few factors, including ones that significantly overlapped with the rating plan. When combined with the underwriting rules, the design was punitive and limited writable business. Through predictive modeling, we helped design a new tiering structure and applied an underwriting scoring approach to eliminate rating plan overlap and remove the overly punitive parts of the plan.
 

Vehicle Rating

Pinnacle was approached by a major national personal lines insurer to develop a vehicle rating program to replace the use of the ISO symbol product. Pinnacle, through the use of predictive modeling, assisted the carrier in designing a new vehicle rating program which made use of the vehicle’s actual physical characteristics for both the liability and physical damage coverages. The data used for the analysis was the company’s VIN data supplemented with industry VIN data and appended for vehicle characteristics from an external third party vendor. The resultant program completely eliminated the need for use of the ISO symbol and exhibited greater predictive power than the prior ISO based system.