Personal auto underwriting expenses challenge many insurers to balance high costs, which can undermine profitability, and cost-cutting measures that may obscure the view of risk. This dilemma has its roots in vital sources of risk data—such as driving history, prior losses, and coverage history—that can be prohibitively expensive.

Motor vehicle reports (MVRs) are a prime example. Verisk clients have found that, on average, 75 percent of MVRs provide no information that would drive an adverse underwriting or pricing decision. Conversely, 25 percent do contain negative risk data that’s needed to price auto policies accurately. Without that data, rates may be inadequate as they fail to reflect the actual risk exposure. The question then is how to glean the information that matters without buying reports that deliver no insight.

Loss history presents a similar challenge: How to avoid wasteful spending for reports on claim-free risks. One auto insurer’s historical experience showed no activity on 40 percent of loss histories.

Still, there’s important data to be had from driving records, losses, or prior coverage lapses. But can insurers capture that data without spending on useless information?

Indicators to point the way

Personal auto insurers can move toward more efficient underwriting when they place innovative risk indicators ahead of full-report ordering in an expense-management ecosystem that also supports a better customer experience. The result can be more quotes that go all the way to bind.

Evidence-based MVR risk indicators can point to adverse activity in a motorist’s driving record with a simple yes/no response that helps focus underwriting spend on drivers with recent violations. Verisk indicators have helped some insurers cut driving history expenses, their highest underwriting cost, by as much as 35 percent.

The same principle can be applied to loss history and verifying prior or lapsed coverage, again incorporating a simple indicator at quote to guide ordering of complete reports only when necessary.

Risk indicators can help personal auto insurers price more business correctly the first time and cut down on second rate calls—upcharges generated from data found just before bind. The result of one-rate quoting can be fewer abandoned quotes and higher new-business conversion rates.

Verisk has unique risk indicators designed to help insurers trim unnecessarily high expenses for underwriting reports. A data-forward strategy in quoting can help focus underwriting spend where it’s needed to generate more sales at a lower cost.

Visit our website to learn more about Verisk’s tools and capabilities to help guide fast, informed personal auto underwriting decisions.

By Dorothy Kelly, vice president of product management for ISO Personal Lines at Verisk