The ISO Risk Analyzer Advantage


Robert Curry, assistant VP and actuary at ISO, says, “There was a time when homeowners underwriting and rating adhered to the old adage that a house is a house is a house. But that approach won’t do anymore, and the rate of change in homeowners rating and underwriting continues to accelerate.” Best’s Review spoke with Mr. Curry recently. Here are excerpts from our conversation.


How advanced analytics plays a role in homeowners


ABOUT ISO World’s largest database of insurance premiums, losses, and claims


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ROBERT CURRY Assistant Vice President and Actuary, ISO


predictive modeling is now more important than ever before. With the intense pressure to stay competitive, a company that lags behind could be subject to adverse selection. Without sophisticated analytics, a company could wind up with just the risks nobody else wants to write.


“ ” In homeowners underwriting and rating,


underwriting and rating: Companies are all looking for the next rating variable — one that will help them identify the best risk to write and assist in developing appropriate premiums for the whole spectrum of risks, from good to bad. Advanced analytics is leading the way toward new approaches, includ- ing by-peril rating and the use of more information about the homeowner, not just the house. Information such as the age of the homeowner and the number of people living in the home is actually working its way into underwriting and rating.


How text mining fits into the equation: A wealth of informa- tion is available to companies in free-form text. Mining that data allows you to glean some previously unknown insights. For example, in a predictive modeling project we recently did, we were able to use adjusters’ written descriptions of claims to separate water damage claims caused by weather from those caused by appliances — say, a faulty washing machine. Using that new data, we built separate predictive models for the two types of claims. We found that different factors led to the losses for each of the categories.


How ISO is addressing these needs: ISO has developed a whole suite of by-peril predictive models for homeowners. We call the products ISO Risk Analyzer®


Homeowners. We


currently have two separate modules available. First, the envi- ronmental module provides loss costs for nine distinct perils at the level of the census block group by Public Protection Clas- sification for a base policy. The other module currently avail- able, the by-peril rating module, provides rating factors for the same nine perils for several key homeowners rating factors: amount of insurance, deductible, and age of construction. We’re looking to provide a range of advanced analytic prod- ucts to help companies — from those already doing their own modeling to those looking for more turnkey systems.


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Best’s Review October 2012


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