The commercial auto insurance market faces a long climb toward profitability, with combined ratios exceeding 100 from 2011– 2022.1 Contributing to this poor performance is premium leakage—more than $15 billion over the past decade due to radius misclassification alone.2 Addressing mismatched pricing and risk at point of sale and renewal with non-rate actions—solutions that don’t require a rate filing—can be among the fastest ways to tackle premium leakage and the resulting profitability challenges.
Addressing mismatched pricing and risk with non-rate actions—solutions that don’t require a rate filing—can be among the fastest ways to tackle...profitability challenges.
Drawing on vast, interconnected, and innovative sources, insurers can harness data to drive non-rate action initiatives. Opportunities include:
Radius
A Verisk study found 23% of commercial vehicles operating beyond the policyholder’s stated radius.3 Of these, 16% were deemed responsible for more than two-thirds of the radius-related premium leakage over the past decade.
Verisk’s RadiusCheck can provide summarized radius data by vehicle identification number (VIN) along with detailed supporting information. This can end reliance on insureds’ self-reporting and deliver a significant return on investment. Claims occurring outside the stated radius have a negative impact on loss ratios and lead to a mismatch in exposure versus the premium collected. Understand how far vehicles are actually traveling, and target the worst offenders by turning precise location data into actionable evidence.
Registration
Policy applicants may forget or omit information such as personal use, lapsed registrations, shared ownership, or branded titles on vehicles that have been junked, salvaged, or flooded.
Verisk’s Vehicle Registration Reports can help correct the record—and pricing—with an automated, all-in-one solution. Clean up misstated, incomplete, and missing vehicle information to find potential hidden sources of premium leakage. Uncover granular vehicle data from a full 17-digit VIN and reconcile discrepancies in new business, book rollovers, and legacy products.
Vehicle attributes
VINs can quickly unlock year, make, model, class, mechanical details, capacities, and an often-elusive data point—cost new. In most cases, Verisk's solution goes above and beyond to provide a more accurate "MSRP-decoded" amount which can be used to evaluate cost new. This information can be critical to setting replacement costs and accurate premiums.
Cutting-edge insurers such as First Chicago are leveraging Verisk’s CL VIN Decode to unlock more than 50 detailed vehicle attributes to help refine underwriting, pricing, and segmentation. Identify unique vehicle risk components: gross vehicle weight rating, engine type, transmission, and more. Reduce manual, error-prone processes with multiple delivery options, and connect to the ISO Commercial Auto Class Plan for more accurate rating.
Many commercial auto carriers that show consistent profitability have invested in data and analytics that yield competitive advantages and help avoid adverse selection. Timely, reliable commercial auto underwriting data and analytics are critical to building speed, accuracy, scale, and outstanding customer experiences that help drive profitable growth and customer retention. But acquiring data and building analytical capabilities can be slow and expensive without the right partner.
Verisk’s Commercial Auto Insurance Solutions can help smooth the road to profitability by helping insurers quickly address premium leakage and data inaccuracies and achieve sophisticated rating segmentation. Other strategies to navigate a persistently challenging environment include:
- Expense optimization through cost-saving tools to track driver risk and strategically outsource compliance
- Straight-through processing via scalable technology and data accelerators for greater efficiency and better service
- Granular data and advanced analytics that refine segmentation and deliver significant lift
Explore four strategies to modernize for the long haul in a new Verisk white paper. Download the white paper
- Aggregates and Averages, AM Best, 2011 – 2023.
- Verisk, Recapturing $6.5 Billion in Commercial Auto Premium Leakage, 2017 <https://www.verisk.com/resources/campaigns/recapturing-billions-in-commercial-auto-premium-leakage/ >, accessed on July 17, 2024.
- Ibid.