• Price Optimization Issue Weighs Heavily in Feedback on NAIC Auto Insurance Risk Classification Survey Draft
  • January 4, 2016
  • Law Firm: Colodny Fass P.A. - Sunrise Office
  • Comments on remaining issues with the National Association of Insurance Commissioners' Auto Insurance Study Group ("Study Group") risk classification data survey and overview document drafts were published on December 18, 2015.

    Built on the results of several states' recent data calls, the survey template is meant to be a guide for states to use to determine the effect of different auto insurance rate classification factors.

    Feedback received last week focused on the following questions:
    • Whether to include a row labeled "Data Analytics Relating to Personal or Consumer Spending Habits," in addition to "Price Optimization," or perhaps some combination of the two
    • Whether selected coverages should remain in the list of rating criteria
    • A definition for "range of impact" that will be able to be answered and result in meaningful responses
    • A definition for "rate related underwriting rule"
    • Instructions to clarify that the column asking for all other criteria with which a criterion be combined is meant to capture composite rating factors developed from a combination of individual characteristics-not multiple separate rating factors to calculate the premium charge
    • How to handle potential instances where there is a very limited population at the extreme ends of a range
    In a letter to the Study Group signed by three of its executives, the Property Casualty Insurers Association of America said " . . . the (Study) Group could have a much greater and more positive impact by focusing on the real underlying causes of higher insurance costs, such as preventable accidents, injuries and damage. This would be more productive than the proposed survey considering its high costs and negative competitive effects."

    The issue of price optimization weighed heavily among the comments, with the American Insurance Association saying " . . . we respectfully recommend that price optimization is eliminated from the list. Price optimization is out of place and is too complicated for a yes or no response."

    Illinois regulators noted that "Price Optimization criteria could result in little if no response or false responses as it is a hot topic and many carriers have products that appear to be utilizing price optimization, but call it something else and indicate that it is not price optimization."