The Relationship of Credit-Based Insurance Scores to Private Passenger Automobile Insurance Loss Propensity

There is no reason to believe that a credit rating of the degree … Although there is a difference between ratings and insurance scores, there may ….

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The Relationship of Credit-Based Insurance Scores to Private Passenger Automobile Insurance Loss Propensity
Foreword … i
About EPIC Actuaries, LLC … ii
Executive Summary … 1
Purpose of the Study… 1
Findings … 1
About the Study … 4
Introduction … 6
Definition of Important Terms and Concepts… 7
Private Passenger Automobiles … 7
Claim Frequency… 7
Average Cost Per Claim … 7
Pure Premium … 7
Relative Pure Premium … 8
Loss Ratio … 8
Relative Loss Ratio… 8
Loss Ratio versus Pure Premium … 9
Risk Factors … 10
Rate Factors … 10
Risk Classification Plans … 11
Univariate versus Multivariate Analysis… 12
Credit Scores versus Insurance Scores … 14
Actuarial Principles and Fairness … 16
Causation, Correlation and Predictive Value … 18
Causation … 18
Correlation … 19
Predictive Value… 19
Study Methodology … 21
State Representation … 21
Type of Policies and Size of Sample … 21
Policy Data and Claims Records … 21
Insurance Coverages … 22
Data Detail … 22
Insurance Scores … 22
Territory Rating … 22
No-Hits/Thin-Files… 23
Multivariate Analysis… 23
Analyses and Findings … 25
Relationship to Loss Propensity … 25
Overlap/Interaction … 32
Importance … 38
By-State Analysis … 39
Limitations of The Study… 40
Appendices … A through R

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