After Towers Watson published its annual predictive modeling survey results a couple weeks ago, I assumed it was well covered.
My assumption was wrong. I realized that the “coverage” was mostly cutting and pasting the firm’s news release. Being familiar with the past studies, my goal here is to give this important survey the deeper coverage it deserves. The study, called, “2012 Predictive Modeling Benchmarking Survey: Advances in Implementation,” can be found here.
Previous studies revealed the benefits of predictive modeling and its use by insurance line. The new study places personal lines and commercial lines into their own buckets. My focus is on commercial lines.
Being a certifiable comp nerd, I had to know how it is progressing in workers’ compensation. To find out, I contacted Brian Stoll, one of the study’s authors, who is a source I have relied on for my predictive modeling articles. He was kind enough to supply the information shown in the chart above.
______________
Ninety percent of the property/casualty insurers surveyed said
bottom-line performance improvements were the motivation
for applying predictive modeling.
______________
The graph above shows that insurer use and/or interest in using predictive modeling for workers’ compensation continues. Keep in mind that the study’s mix and amount of responders changes for each study. This year’s results include smaller insurers who are likely not yet in a position to apply predictive modeling.
Ninety percent of the property/casualty insurers surveyed said that bottom-line performance improvements were the motivation for applying predictive modeling.
This confirms the assertions I make in my blog, Predictive Modeling Is Here to Stay, which was published one day before Towers Watson’s results were released.
Most carriers report bottom line profitability from predictive modeling. Commercial lines carriers have seen positive effects in: rate accuracy (83 percent), loss ratio improvement (72 percent) and profitability (61 percent.)
Bottom line positive impacts for commercial lines carriers are: renewal retention (39 percent), market share improvement (33 percent), and expansion of underwriting appetite (22 percent). The report says that given trends, standard commercial lines will likely achieve benefit levels even more over the next few years. I agree. Commercial lines insurance has been following the lead of personal lines all along, so as efforts mature, so will results.
Another important point: midsize and larger employers report more favorable bottom line results, particularly in loss ratio improvement and profitability. “This is likely a result of first-move advantage,” the study says.
Other significant tidbits are:
- Commercial lines carriers focus more on loss ratios than the frequency/severity models used by personal lines.
- Predictive modeling continues to have barriers including access and cleanliness of data, IT limitations and “people/cultural issues.”
- It appears that carriers of all the p/c lines surveyed have not yet taken advantage of reducing manual renewal costs or focused their manual underwriting activities on higher-premium or more complex accounts.
The study was based on 63 insurance executives from the U.S. and Canada. Responding companies represent a significant share of the U.S. P&C insurance market for both commercial lines insurers (21 percent) and personal lines carriers (17 percent).
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Related Blogs:
Predictive modeling will more accurately reflect an employer’s specific experience. Click Here
- Predictive Modeling Is Here to Stay Click Here
- Predictive modeling and premium auditing Click Here
- “Predictive Modeling Is Here to Stay” Discussion on the LinkedIn Group: Workers Compensation Roundtable Click Here
- Predictive modeling and Your Insurance Agent and Broker. Click Here
- Predictive Modeling ‘s Impact on Agents and Brokers—and Their Clients Click Here
- Workers’ Compensation Predictive Modeling Click Here
- Workers’ Comp Predictive Modeling and Self-Insured Employers Click Here
Related Articles:
- Workers’ Comp Predictive Modeling Comes of Age Click Here
- Predictive Modeling ‘s Impact on Agents and Brokers—and Their Clients Click Here
