Report from Quality Planning Corp. highlights the risks of living near restaurants, medical buildings and grocery stores
SAN FRANCISCO, Dec. 6, 2005 — If you live within a mile of a church, you're far less likely to have a car accident than drivers who live more than a mile from a church. But if you live within one mile of a restaurant, you face a significantly greater risk of an accident than most other drivers. Those are among the key findings of a study released today by a leading predictive analytics company — Quality Planning Corporation — a firm that helps insurance companies price insurance more accurately and fairly.
Quality Planning Corporation (QPC) examined the relationship between where a vehicle owner lives and the likelihood that he will be involved in an auto accident and concluded that the riskiest place to live is within one mile of a restaurant. In fact, if the owner of an automobile lives within one mile of an eating establishment, he is 30 percent more likely to crash his car than if he lives more than one mile from the restaurant.
The study examined more than 15 million policyholders and two million claims, mapping the proximity of vehicle owners' addresses to various types of businesses, including amusement centers, bars, churches, dentists' and doctors' offices, parking lots, banks, car dealers, car washes, child day-care centers, gas stations, medical buildings, movie theaters, optometrists' offices, schools and shopping centers. The study found that the riskiest places to live near are restaurants, grocery stores, schools and banks. At the other end of the scale, individuals that live within one mile of an airport, park, forest or racetrack are much less likely to suffer vehicle damage.
When it comes to car crashes, churches are the least risky neighbor of all. People who live within one mile of a church are 10 percent less likely to have an accident resulting in a property damage claim than if they lived more than one mile from the church.
Commenting on the statistics, Dr. Daniel Finnegan, founder and CEO of QPC, noted: "It's well known that auto insurers use a policyholder's ZIP code to calculate the risk he or she represents. New technology enables us to be even more accurate in determining the level of risk associated with a policy by identifying the specific risk factors associated with that policyholder's home address.
"In our research to develop a new predictive loss model for auto insurers, we have identified more than 500 variables that are highly correlated to auto accidents, many of which are specific to a policyholder's home address. Among the more interesting variables we found are hailstorms, crime rate, topography, traffic patterns, occupation, street width and chiropractors per capita."
Insurance companies have historically based policyholders' rates on their ZIP code or where their vehicle is kept. While ZIP codes may be convenient and necessary for speedy mail delivery, they are not a particularly good predictor of property/casualty insurance losses. The ability to assess risk at the street-address level is a major breakthrough in private passenger auto underwriting and will eventually lead to more accurate rating and could reduce premiums for some drivers.
TABLE: Increase in physical damage claims by living within one mile of:
|Top Tier||Bottom Tier|
|Restaurant||30%||Racetrack or amusement park||11%|
|Grocery store||26%||Hotel, motel, resort or spa||5%|
|Elementary or secondary school||26%||National park or forest||4%|
|Bank||25%||Local or community park||3%|
|Gas station||22%||Doctor's office or clinic||1%|
|Liquor store||18%||Religious institution||-10%|
"It's important to remember that these observations are indicative of the area, and we would naturally expect higher accident rates in higher traffic areas," added Bob U'Ren, vice president of marketing at QPC. "Traffic patterns and density are often key considerations when selecting sites for restaurants and grocery stores. There are also comparatively fewer homes and apartments, and generally lower vehicle use, close to parks and forests. But who would have thought it is more dangerous to live by an elementary school than a liquor store? Or a bank versus a hotel?"
QPC periodically releases snapshots and analyses of auto insurance data to raise awareness of the factors that determine what consumers pay for auto insurance. Previous reports have examined the fraudulent use of Social Security numbers when applying for insurance, the abuse of the "farm discount," older drivers and auto accidents versus violations, the relationship between occupations and auto accidents, teenage drunk driving, and the discrepancy between reported and actual mileage.
Rating integrity and competitive advantage
QPC assists auto insurers in their efforts to minimize rating error. QPC takes an auto insurance company's book of policyholders and processes it through a battery of more than 150 proprietary tests, cross-reference checking and pattern-matching algorithms to identify errors and discrepancies that might suggest fraud and misrepresentation on the part of consumers. QPC also provides insurers with additional services such as policyholder phone interviews to discover missing drivers, verify garaging addresses, and determine annual mileage and other key rating information. Over time, insurance companies with accurate rating information are better able to compete and are more financially stable.
About Quality Planning Corporation
A member of the ISO family of companies, QPC is focused exclusively on providing decision integrity solutions to the insurance industry. QPC works with insurance companies to identify areas of significant premium leakage using sophisticated database management, statistical analysis and modeling, customized survey design, and highly targeted customer interaction. Quality Planning Corporation (QPC), the rating integrity solutions company, was founded in 1985 and is headquartered in San Francisco. For more information, visit http://www.qualityplanning.com.
ISO is a leading provider of products and services that help measure, manage and reduce risk. ISO provides data, analytics and decision-support solutions to professionals in many fields, including insurance, finance, real estate, health services, government and human resources. Clients use ISO's databases and services to classify and evaluate a variety of risks and detect potential fraud. In the U.S. and around the world, ISO's services help customers protect people, property and financial assets. For more information about ISO, visit www.verisk.com/iso.
Tim Cox (QPC)