Workers’ compensation carriers can now accurately score a policy even where there is no loss history on the account, according Valen Analytics, a data analytics and predictive modeling firm for the property/casualty insurance industry.
Valen has released the latest in its suite of predictive models, the Unavailable Loss History Model, which it says is a “first-to-market” product.
Insurers quoting policies have traditionally viewed prior loss experience as a key parameter in evaluating the quality of risks. Yet, Valen says insurers can score up to 70% of small premium policies without any loss information. Valen says that its model, now in its fourth generation, employs a combination of third-party and synthetic variables derived from its own custom databases to deliver “highly accurate predictions for insurance policies without any loss history information.”
Valen said the model has been tested against a 10-year loss data set of approximately 650,000 policies representing $7.6 billion in premium. The new model is programmed to answer the question, “How do similar policies perform?” as an indicator of risk quality.
“With this latest solution, we are entering the next stage of industry innovation in predictive analytics,” said Kirstin Marr, president of Valen Analytics. “Being able to deliver valuable insights despite the absence of a key piece of information like loss history is a true testament to the power of partnering around data. As insurers pursue the small commercial market, the ability to accurately assess risk, while collecting less information on the application is crucial to gaining market share.”
According to Valen’s research, synthetic variables developed with Valen’s consortium data demonstrated up to 13 times more predictive power than variables built with policy-only data. Synthetic variables are built from computations of more than one variable and leverage the breadth and depth of experience in Valen’s own data consortium, which includes data from dozens of third-party sources and more than 60 insurers.
Valen Anaytics is an Insurity company.
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