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ISO Risk Analyzer Enhances Rating Toolkit

Staff Writer | January 28, 2015

ISO announces today the availability of its latest predictive analytic offering to help insurers increase accuracy in risk selection and pricing for small business risks. The new offering, the ISO Risk Analyzer Businessowners By-Peril Rating Factors Module, complements its environmental counterpart by introducing by-peril rating factors for business owners property. Together, the two modules provide insurers with a highly detailed look at how major perils affect loss potential. 

"With the small business sector growing steadily and competition in the personal lines intensifying, many insurers are looking to small commercial risks as an area for potential profitable growth," says David Cummings, senior vice president, ISO Insurance Programs and Analytic Services. "Some have begun to extend business owners program eligibility to more types of risks as well as to larger risks, while others are entering the small commercial market for the first time."

Traditional rating methods may not sufficiently capture the variability in risk, but the use of predictive analytics to develop by-peril rating plans for business owners has the potential to improve loss ratios and grow market share as it did for homeowners, according to Cummings.

"In fact, over the past five years, we've seen early adopters of homeowners by-peril plans gain an additional 6 percent of market share while maintaining loss ratios 6.6 points lower than competitors not using by-peril rating," he says

When it comes to predictive analytics for business owners, the ISO Risk Analyzer Businessowners predictive modules can help solve the data quality and credibility issues many insurers struggle with.

"Insurance carriers can readily use the ISO Risk Analyzer output to potentially jump-start their risk-based pricing efforts or enhance those already in use," says Douglas K. Wing, assistant vice president, Analytic Products, ISO. "Many of our customers using the business owners environmental module have already identified significant lift in their book of business and are now looking to incorporate the new rating factors module for additional improvement. As many insurers move toward using online distribution channels for small commercial risks, increased accuracy in rating and pricing segmentation will likely be critical for success."


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