Six months in – is individualized rating working?

Saskatchewan’s government insurer introduced individualized rating for home and auto insurance starting on January 1 – what has been the result six months later?

Risk Management News

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Saskatchewan’s government insurer introduced individualized rating for home and auto insurance starting on January 1 – what has been the result six months later?

One broker, Diana Luker, manager of Affinity Insurance Services in Meadow Lake, Sask., says she hasn’t noticed any real difference since the new rating system was introduced.

“There’s been no difference on the auto side, and with the home, we’ve only noticed the odd one that has gone up quite a lot,” says Luker. “But on the whole, no – we haven’t seen that much.”

But Luker does chalk that up to her book of clients, as she cites a neighbouring broker who has seen quite a few clients encounter sizeable jumps in premium.

“But that could be due to the age of the house, or the age of the client,” she says. “That’s what I told him – I don’t know. I guess that is why they call it ‘individual rating.’”

SGI said it has been talking to its brokers about using more sophisticated analytics to obtain more individualized rating of risks for at least a year prior to its introduction at the start of the year. Private insurers such as Intact, Economical and many others distributing through the broker channel have already transitioned to the use of data analytics.

“Individualized rating is looking at doing analytics on our data to find different rating variables or combinations of variables that are predictive of loss and that we have never seen before,” Don Thompson, vice president of program management at SGI, told Insurance Business. “We view this as helping the broker channel survive against direct writers. It’s a better, customer-focused way of rating in our minds. It better matches risk with the price of insurance. If we can’t match the sophistication of rating that direct writers have, we are going to lose business to those markets.” (continued.)
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The chief concern brokers had was about the transparency of the new way to rate home and auto policies. Under the new system, published rating manuals are no longer distributed, and the new rating system includes an online calculator.

“At the end of the day, we want the ability to still be the advisor for our customer,” said Garth Neher of Southey Agencies Inc. in Saskatchewan.  “As long as SGI can give us enough information so that I can say to my clients, for example, that when their houses fall down, their premium will go up $150 this year – I can at least have enough of a guideline so that I can truly advise you on what they are rating.”

Although it is already six months into the new rating system, it is still relatively early to judge the results, says SGI spokesperson Kelley Brinkworth.

“Although SGI now has the framework and infrastructure in place for individualized rating,” says Brinkworth, “we have not yet significantly changed how we rate various risks in our home and personal auto products. We are expecting these more sophisticated rate changes to be implemented in the near future.”

 

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