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Valen Report Quantifies Effects of Adverse Selection in Commercial Lines

Staff Writer | November 07, 2014

Valen Analytics released its 2015 Outlook: Commercial Lines report, addressing the top challenges and opportunities in the industry. As insurers face rapidly changing market dynamics and the likelihood of disruption, Valen’s report highlights the need to accelerate adoption of data analytics in order to protect market share from top insurers and non-traditional competitors alike.

Valen’s report highlights the growing threat of adverse selection, showcasing the loss ratio impact amongst three groups: insurers that adopt predictive analytics, those who price match their competitors but do not mitigate against their worst-performing risks, and those who have their best business stolen from analytically-driven competitors. On average, insurers that are vulnerable to analytical competitors will experience a loss ratio shift of minus-19.7 percent.

“We’re starting to see a division between the ‘winners’ and ‘losers’ of adverse selection emerge in today’s shifting landscape,” says Dax Craig, CEO and president of Valen Analytics. “It’s an increasing concern within commercial lines because the impact is oftentimes invisible until after the damage has been done to a portfolio. The good news is that the opportunities to compete in today’s fierce market are there for those who prioritize data and analytics. ” 

Valen used proprietary research to quantify the benefits of analytics in underwriting, and presents best practices for insurers who are just starting with predictive data.  The report outlines:

  • Top Three Threats in Commercial Lines
  • Data-Driven Decision Making
  • Hard Numbers on Adverse Selection

The 2015 Outlook: Commercial Lines report, along with several complimentary resources on the latest underwriting techniques and pitfalls to avoid, can be found in Valen’s Resource Center at www.valen.com

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