Underwriting expenses can confront insurers with what appears to be a stark choice: Incur high costs that eat into profitability, or spend sparingly and fly blind in the early stages of quoting. At the heart of this dilemma are critical but often pricey sources of risk insight such as driving history, prior losses, and coverage history.
Innovative risk indicators can be central to expense management.
Take motor vehicle reports (MVRs): The good news is that on average, 75 percent are clean for underwriting purposes, based on Verisk client experience. But that means one-quarter contain adverse risk data that’s important in pricing auto policies accurately. Missing that data can lead to inadequate rating that doesn’t account for the true exposure. But is it cost-efficient to order three clean MVRs for every “dirty” driving record found?
Loss history likewise presents a challenge to capture needed data, whether for auto or property applications, without spending needlessly on risks that have no claims history. One auto insurer found that historically, 40 percent of loss histories showed no activity. Whether it’s driving records, losses, or prior coverage lapses, how do insurers capture vital data without squandering resources on what they don’t need to know?
New solutions indicated
Innovative risk indicators can provide a path to greater cost efficiency in underwriting. Placed in front of full-report ordering, they can become a core element in an insurer’s expense-management ecosystem. At the same time, they can contribute to a better customer experience that carries more quotes all the way to bind.
- Along with extensive access to driving record details, Verisk offers an evidence-based MVR Risk Indicator that provides a simple yes/no response as to adverse activity in a motorist’s driving history. These risk indicators can help an insurer focus its underwriting spend on drivers with recent violations. Some insurers have seen driving history expenses, their largest underwriting cost, cut by as much as 35 percent with the use of Verisk’s indicators.
- Verisk’s A-PLUSTM Claims Activity Profiler (CAP) can help an insurer decide whether to order full loss history at quote, again incorporating a yes/no indicator of claim activity in its underwriting criteria. With high hit rates and a consultative approach, Verisk can deliver customizable solutions for both auto and property insurers.
- Before proceeding with an auto quote, insurers can quickly verify whether a customer had existing coverage or a lapse using the Proof of Prior Insurance option in Coverage Verifier.
These risk indicator solutions can significantly improve a company’s ability to price business correctly with the first quote. They can reduce the number of second rate calls in which customers are upcharged based on data found just before bind. This one-rate quote flow can lead to fewer abandoned quotes and higher conversion rates for new business.
Verisk has designed its unique risk indicators for insurers to help trim vast, unnecessary spending on underwriting reports. Moving data forward in the quote flow and focusing underwriting dollars where they’re needed most can help insurers spend less to sell more.
Read our new case studies on cost-saving innovation journeys in auto loss and coverage history and MVRs, explore the benefits of a digital underwriting ecosystem, and contact a Verisk representative to see where innovation can take you.