Conning is making some interesting-sounding noise about their latest paper on the nonstandard auto market. From a Conning press release:
“As predictive modeling has become more prevalent in auto insurance underwriting, the standard auto market has expanded to include and price risks that would once have been thought of as nonstandard,” said Alan Dobbins, analyst at Conning Research & Consulting. “As a result, the new nonstandard market is undergoing a dramatic shift in risk profile.”
The Conning Research study, “The Nonstandard Auto Insurance Market: Evolutionary Challenges” reviews the recent history and performance of this market, and explores the forces shaping change in the segment.
A few of us have been expecting this for a while.
Back in the day, when I worked credit scoring, I was routinely asked why insurers love credit scoring.
Well, yes, there are the very basic goals of being able to increasingly differentiate among risks, and of having a new predictive rating/underwriting variable which is rather uncorrelated with other metrics we’ve traditionally relied upon.
However, I think the transition to credit-scoring based rating/underwriting during the late 90’s and the early part of this decade is more significant as a landmark highlighting actuaries and insurers starting to look at data in different ways.
With a lot of cheap computing power at our fingertips, potent statistical packages easily available to undertake the arcane mathematical incantations, it’s an exciting time to be working, if you like playing with data.
Credit scoring is a rather prominent milestone on the road to more sophisticated multivariate analysis of insurance data. Once we get beyond the mental/psychological roadblock of certain data not being intuitively related to insurance results…some pretty exciting things become possible.
To be honest, with the arsenal of data and modeling tools now available….well there are a few actuaries in the industry who probably wouldn’t mind seeing credit scoring go away, now that we have freedom to look at and manipulate data in pretty snazzy ways.
And that doesn’t just apply to auto, or even to just personal lines. Some of the models being built to evaluate commercial lines business are pretty darned cool, at least to those of us who enjoy this sort of thing. 
1 response so far ↓
1 Joe // 13 Mar 2008 at 5:38 pm
I thought it had been dead for a while. I’ve been out of that game for a few years, but when I was last in it the distinction was between auto only and auto/home companies.