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Valen Releases Predictive Models for Commercial Auto Carriers

Valen Analytics announces its Risk Score for commercial auto insurance within the InsureRight Platform. The predictive models empower underwriters with greater visibility into risk selection and pricing, while also providing a detailed explanation of the risk quality associated with each policy.

The Risk Score for commercial auto leverages a data consortium with $2.5 billion in premium and $1.7 billion in claims, and is custom built for insurers of all sizes, based on their portfolio and business strategy.

The commercial auto data consortium consists of recent and detailed policy, vehicle, and claims data from 2005 to 2015. Additional data elements include regional demographic characteristics, Safety and Fitness Electronic Records (SAFER) inspection and crash information, vehicle size, trailer units and unit age. Forty-seven distinct garaging states are represented - including local, intermediate, and long driving distances.

The InsureRight Platform identifies the highest risks policies (top scoring 10 percent of premium) and the best risks (lowest scoring 10 percent of premium). Insurers will now be able to use this classification of risk for policies in commercial auto to identify and more appropriately price policies with heavy future losses, or replace them with better performing policies and achieve a significant loss-ratio improvement. Policies predicted to be high risk have five times the future loss ratio as the best performing policies. In addition, the most profitable risks are easily identified to enable insurers to grow premium while maintaining an underwriting profit. 

“As the commercial lines market continues to show signs of consolidation, it’s more important than ever that insurers are equipped with the data needed to make the most informed decisions on pricing policies,” says Dax Craig, CEO of Valen Analytics. “Using InsureRight allows underwriters to replace the poor performing policies and spend their time adequately pricing the best business available to the market, allowing them to grow while remaining profitable.”

By leveraging Valen’s InsureRight Platform, insurers are able to avoid selection bias derived from exclusively using their own siloed data set, and insulate themselves from adverse selection—where a competitor equipped with more knowledge on a policy is able to win the best risks, leaving the incumbent insurer inadequately pricing the poorer performing risks. Additionally, the models perform in changing rate environments and shifting market conditions in order to maintain long-term competitive advantage.

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