Rodney Griffin
SVP Product Management
StoneRiver
In Part 1, I mentioned some of the new materials and components that are leading to new injury and severity profiles. Research shows some interesting trends for hybrid and electric vehicles. How do these changes affect auto insurers? What can they do to address what lies ahead?
Rating agencies currently use auto symbols to differentiate between vehicles, but generally over-weight by historic trend data and less by emerging trends. Specific demographics of each book can differ enormously with unique characteristics, especially for carriers targeting specific affinity markets and geographies. Unless a carrier monitors and manages trends frequently, its practices and rates will be less than optimal.
To stay profitable and competitive, auto insurers have to become far more responsive as new data and trends emerge. Companies will need to identify, capture and analyze new kinds of information. And, their responses will require changes in rates and classifications as well as claims adjustment practices.
Business Intelligence systems providing Key Performance Indicators are vital to identify and monitor indicators to track trends. Accurate trending requires an approach that combines claims, policy, reinsurance and distribution dimensions of data along with external source data enrichment. Only after this data is combined and mined, will a company have a comprehensive view of what is actually going on.
Business rules need to be external from the programming code and in a business-friendly repository that can be easily maintained for response to new trends. It’s critical to have a business process management capability for making fast adjustments when process flows require an overhaul. Companies that can identify and quantify trends earlier and that can respond quickly will have a distinct advantage over their competitors.
There is no doubt that increased volatility in claims experience will drive many IT initiatives to improve capabilities in these key areas.