Power of Segmenting
Insurance carriers are dealing with dramatically rising rates and historic losses. The industry as a whole has been facing similar issues for the past few years. 2019 alone saw a staggering $4 billion recorded in underwriting losses. Unsurprisingly, the transportation industry has been negatively affected by this, especially since increases in insurance premiums have not been enough to make up for these losses.
What’s driving these astronomical figures? As is often the case, there are a variety of factors coming into play. These range from the typical, such as distracted driving, driver shortages, and litigation financing, to the singular, like damaging nuclear verdicts. One less recognized contributor to these high losses and unacceptable combined ratios is poor decision making due to a lack of segmentation. Many insurance professionals rely on industry averages shown on SAFER System or other risk analysis tools. These aggregated statistics are only marginally useful because they include every type of DOT registered motor carrier such as tractor trailers, local box trucks, dump trucks, tow trucks, motor coaches, school buses, vans, and limousines.
To make the best possible decision, you need to compare like-kind motor carriers. For example, compare a refers with other refers, dump trucks with other dump trucks, etc. The same can be said when writing any specific type of risk. The best decisions can be made based on segmented market statistics for the same type and size motor carriers.
Failure to segment data leads to incorrect conclusions that can contribute to the sky-high losses that characterized 2019.
What can be done about this? The insurance industry, for the most part, attempts to address the segmenting issue by allowing underwriters to choose from a selection of programs with premiums that can be tweaked depending on the type of motor carrier and their insurance need. However, this does not address the fundamental issue. Data that only considers motor carriers as an aggregated group is still displayed on the FMCSA SAFER system and widely used in typical underwriting reports.
Carrier Software has a better way: cohort-based analyses.
A cohort approach is based on comparing motor carriers that have the same size fleet hauling the same cargo. By comparing like-kind motor carriers, assessing whether a motor carrier is safer than their peers, becomes clearer.
Our Carrier Underwriting Report is based on cohort analyses that segment risk data into similarly-sized and type truck companies. Fleet size and cargo peer groups are just two examples of the type of segmenting you can use while conducting your underwriting analyses. This way you can have the most accurate information results at your fingertips when it comes time to make those all-important underwriting decisions.
Want to experience the power and accuracy of segmenting data for yourself and see what it can do for your insureds? Call now to schedule a free webinar!