Quality Planning Helps Assure Fair Auto Insurance Pricing

When insurance rates are fair, the premium for each policy is directly associated with the risk that the insurer assumes in issuing the policy. Verisk’s Quality Planning (QPC) unit is dedicated to assuring fair pricing for automobile insurance. In addition to promoting equity among consumers, QPC supports the reasonable expectations of insurance company shareholders and reduces auto fraud. That leads to overall lower insurance premiums for all.

The information used to rate policies is often incorrect, outdated, or incomplete. Poor information results in incorrect rating and leads to an enormous amount of premium loss each year. Part of the premium loss comes from honest mistakes — for example, a policyholder forgetting to report a new, longer commute to work. However, a large number of rating errors come from policyholders who deliberately give incorrect information in an attempt to lower their premiums.

The QPC Rating Integrity Solution identifies such policyholders by using advanced statistical algorithms, predictive modeling, and state-of-the-art pattern matching. Policyholders who misrepresent underlying policy information cause honest drivers to pay more for their insurance than they otherwise would. In the near term, honest policyholders lose out. In the long run, many of those policyholders will look for new, more accurately priced policies with a different insurer.

Eliminating premium subsidization and charging the right price for a policy’s true risk lets insurance companies offer competitive rates, retain good drivers, and reduce the overall cost of auto insurance to society.