In the business of underwriting and pricing commercial vehicles, getting ahead can be difficult if not impossible. Using vehicle history information — accident, mileage and previous-ownership histories, as examples — can help predict commercial fleet losses and provide a much-needed boost to an insurer’s risk assessments.
Gaining insight into the vehicles you’re underwriting goes a long way toward overcoming some of the commercial auto insurance industry’s most vexing road blocks to profitability — such as the four challenges discussed below.
#1. A lack of available consistent, reliable information for underwriting and pricing. The fact is, self-reported and difficult-to-verify rating variables will result in premium leakage. Moreover, insurers whose rate plans do not deliver sufficient predictive value are overly reliant on underwriters to apply discretionary pricing. When not used correctly, discretionary pricing can be subjective and anecdotal, and it doesn’t consistently address merits of risks.
Solution: By incorporating vehicle history scoring into your pricing, you’ll get more accurate insights on commercial vehicles that you can then use to make informed pricing decisions. As a result, your rate plan will be more predictive, allowing you to free up underwriter resources for more complex risks.
#2. The negative impacts to profitability of adverse selection and cross-subsidization of products is unsustainable for commercial auto insurers — insurers will eventually need to improve the pricing fundamentals of their commercial auto products.
Solution: By improving pricing and better predicting the likelihood and severity of future losses, you’ll help commercial auto insurance better stand on its own without subsidization from other lines.
#3. Commercial auto underwriting processes can be frictional and subjective. Manual, difficult processes increase underwriting cycle times and can result in poor customer and agent experiences.
Solution: Vehicle history scoring is based on objective data and is highly scalable. As a result, insurers potentially could deliver a smoother customer experience by prioritizing underwriter review for only the poorest scoring risks, and expediting the highest scoring risks through the underwriting process.
#4. Customers’ willingness to tolerate expense inefficiency through higher premiums will deteriorate over time as more innovative carriers leverage low-touch underwriting and more sophisticated rating to reduce expenses.
Solution: Vehicle history scoring can be part of a quantitative low-touch quoting environment that’s both more efficient and more predictive of losses. All that benefits customers with premiums in line with their real-life situations.
Wanted: Objective insight into commercial vehicles
To help solve the challenges detailed above, check out TransUnion’s Commercial Vehicle History Score powered by CARFAX®. This new solution helps rapidly predict future loss ratio and returns an actionable score for use in commercial auto underwriting and pricing.
- Benefits include:
- Improve quote accuracy
- Gain an edge on competitors with cutting-edge segmentation
- Avoid adverse selection
- Increase efficiency and profitability