Ah-hah, we could have seen better underwriting results from auto

A few days ago Insurance Journal published an article Auto Losses Seen Cutting P/C Insurance Profits Until 2016 by Andrew Simpson with an “Aha” insight that you might have missed. Allow me to draw your attention to a comment after highlighting a recent SNL report projecting a personal lines combined ratio of 100.2 for 2015. Commercial Auto too has declined in profitability by 2.1%. The author also points out the obvious need for Auto Insurers to achieve stronger underwriting results in light of continuing low interest rates. Earlier this year insurance carriers began to plan for interest rate increases in September however, with China's financial and economic troubles on the rise, the negative impact of the surging US dollar, rising deflationary forces globally and falling asset prices; the probability exists they will push off the rate hike off even past the end of the year. Things are looking bleak for Auto insurers as Berkshire Hathaway’s second-quarter profit slumped 37% due in part to an underwriting loss attributable to higher claims costs at auto insurer Geico.

And yet, there existed good news from Progressive. Mr Simpson might have underscored this more strongly when he said, “Progressive Insurance actually reported a slight improvement in its auto combined ratio to 93.5 for the six months ended June 30. CEO and President Glenn Renwick has credited the firm’s telematics product, Snapshot, which reports on driver behavior, as giving it a early indication of auto trends including miles driven.”

What is the “Ah-hah” moment you ask? Nope, not that Progressive’s Snapshot program could be considered the 16th largest insurance carrier and is impacting overall results. The point of note - Snapshot provided early indications to the entire company, as the economy was improving and oil prices were falling last year, miles driven was going up and frequency, not surprisingly, was too!

Without an internal data source like the Snapshot program where should an insurance carrier turn for an early warning, or “Ah-hah” insight, so profoundly affecting its portfolio loss ratio. With Google Compare now in the market place with potential access to billions of miles of driving data, insurance carriers should be even more anxious for an answer. The answer exists in the form of the industry’s first telematics data Clearinghouse from ATG Risk.

With the permission of a policy holder, through the Clearinghouse a carrier can today access the telematics data from over 60% of North American commercial vehicles equipped with aftermarket telematics, a percentage expected to rise considerably over the next twelve months; soon to include personal vehicles.

By itself, data on a carrier's internal portfolio of vehicles representing a mere15-20% of the overall portfolio and might not seem like an “Ah-hah” moment but... Here’s the insight. This data AND the anonymized statistics which a P/C Carrier receives from the Clearinghouse have shown the rising trend in driven miles, that Progressive knew about, for well over eleven months. The Clearinghouse has access to millions of vehicles most willing to share telematics data; as many or more than Snapshot has on the road today. Every carrier, from the regional, to the super regional to a major carrier like GEICO that doesn’t yet have a full UBI program in the market can benefit from these anonymized statistics.

To repeat the “Ah-hah” moment in a way you’ll all likely more immediately appreciate... it takes less than 7 or 8% of the traffic reporting in an area for Google Maps to provide a very good representation of congestion on the road ahead. Does it make sense that the aggregated data from the world’s largest driving data Clearinghouse could provide insight to proactive auto insurers trying to avoid the profit erosion Andrew Simpson has forecast?

To learn more about the  Clearinghouse and what every insurer, personal or commercial, can do today to strengthen auto underwriting results, please come and listen to the Data Decisions Track at the TU Telematics Insurance Conference on Sept 2nd & 3rd in Chicago.

 

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