Like any long-term relationship, the one between an insurer and a policyholder is bound to evolve as circumstances change.
Events in the customer’s life—marriage, divorce, new job, relocation, or driving-age children—alter the risk. And that contributes to the $29 billion annual problem of premium leakage for auto insurers.
Research on this issue is featured in a Verisk Innovation Paper, The Challenge of Auto Insurance Premium Leakage.
Effectively capturing changes that may warrant up-charges or require the application or removal of a discount is best achieved at renewal.
Recognize best risks
Discounts provide ways to recognize and reward the best risks and attract business through affinity groups, employers, and organizations. But some drivers misrepresent themselves or don’t update discount-related information.
A robust marketing database combined with sophisticated analytics can reveal many life events and help to verify eligibility—or ineligibility—for many discounts. The same analytics that improve underwriting and rates at point of sale can be applied to ensure appropriate pricing and coverage throughout a policy’s life cycle.
The Innovation Paper is based on the findings of two Verisk research initiatives. The 2016 Verisk Auto Insurance Premium Leakage Survey explored insurers’ concerns, programs, and plans regarding premium leakage.
Verisk also conducted a client analysis for 82 insurers split evenly between the standard and nonstandard markets. The insights from these initiatives provide readers a deeper look at premium leakage by source; best practices for tackling it; and cutting-edge tools that can enable a focused, strategic approach to balance growth, retention, and profitability.
Reference:1. Verisk analysis of personal auto insurance policies in Coverage VerifierSM database, 2015–2016.