With the rise in auto claims severity, insurers are looking for new ways to effectively manage commercial auto risk. Distracted driving, nuclear verdicts and high repair costs make it more difficult than ever for commercial insurers to find a path to profitability.
There are a few levers that insurers have at their disposal to proactively reduce loss ratios and protect their clients from future litigation. Developing and benchmarking policyholder risk profiles is one of the most powerful options. By comparing a company’s risks against their historical performance and that of their peers, insurers can gain valuable insights into their portfolios, identify potential vulnerabilities and take proactive measures to mitigate risk. This approach helps insurers price policies more accurately and enhance overall portfolio performance.
Let’s explore the importance of insurance benchmarking, the methods used to implement it and the benefits it offers insurers in managing insurance portfolios.
Understanding Policyholder Risk Profiles
A risk profile is an in-depth assessment of the potential risks associated with a policyholder. It typically includes various factors such as the company’s location and geographic footprint, covered vehicles, employee violation and claims histories and specific exposures related to their business activities. For commercial insurers, understanding these profiles is crucial, as they provide insight into the likelihood of future claims and losses.
Risk profiles are critical to effectively track leading risk indicators and proactively inform intervention efforts. Policyholders that leverage a continuous monitoring program and have complete visibility into their risk profiles can implement more targeted, intentional training to effectively mitigate risk before a crash or claim occurs. Businesses have achieved a 77% reduction in driving violations after the first year of monitoring and training with SambaSafety. One can easily see how this could benefit the collective risk profiles within a commercial auto insurer’s portfolio.
Download Case Study: See How a Major Retail Fleet Customer Reduced Risk with SambaSafety Solutions
Data Used for Benchmarking Risk Profiles
Effective risk benchmarking begins with collecting and analyzing relevant data. It’s important for insurers to consider a wide range of metrics to get a complete picture of a policyholder's risk profile. Key metrics to consider include:
Driving Behavior
Behavioral performance metrics such as speeding, harsh braking and rapid acceleration are captured by telematics devices and dash cameras. This highly granular data is essential to assessing risk and predicting future claims, making it a key component of a policyholder's risk profile.
Claims History
Historical claims data provides valuable insights into a policyholder’s past risk exposure. Insurers should analyze the frequency and severity of past claims to identify trends and potential areas of concern. This information helps insurers establish benchmarks that can be used to predict future risk levels, recommend training and adjust coverage or premiums accordingly.
Driving Violations
Driving violations, though less frequent than telematics events, are a reliable indicator of risk and form a key part of the risk profile. For policyholders in regulated industries, such as transportation, insights from roadside inspections and DOT-reportable crashes, available through the Federal Motor Carrier Safety Administration (FMCSA), contribute to a comprehensive risk assessment.
SambaSafety’s Risk Index consolidates all these data sources into a single platform, offering unique and complementary insights that no other company provides.
Demographic Factors
Industry-specific data and demographic elements, such as the age and experience of drivers, can also influence risk profiles. Drivers in certain industries may be more prone to accidents due to the nature of their work, while demographic factors like age or years of experience might correlate with safer driving practices. For example, drivers aged 18 to 25 have the highest number of speeding violations, while drivers aged 36 and older are commonly cited for distracted driving and phone use.
By incorporating these factors into their analysis, insurers can develop more accurate benchmarks that consider the unique risks associated with different policyholders.
Combatting Challenges in Proactive Risk Management
Setting your business up to outperform competitors is no easy feat, but it is attainable. The quantity and quality of data available to an insurer today can have a resounding impact on their bottom line, if leveraged intentionally. Proactive insurers who take the opportunity to develop a deep understanding of their policyholders and the risk that they pose on the road will reap the benefits.
As with any solution, establishing and benchmarking policyholder risk will have its challenges. Chief among them are data quality and availability. However, insurers that leverage an experienced data aggregation partner with established integrations, will get a head-start on successfully implementing insurance benchmarking into their risk management practices. Read how a large retail customer reduced their riskiest driver scores by 40% in 3 months using our solutions.
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