The word prediction brings up a lot of negative connotations. We often laugh at predictions made about who will win an election or a Super Bowl, but insurers aren’t laughing at the predictions they are able to make about customer behavior that allows them to draw up models that limit exposure to risks.
In a recent report from Towers Watson (“Predictive Modeling Proving Its Worth Among P&C Carriers”), Brian Stoll, director and co-author of the report for Towers Watson, explains the value insurers have gained.
Stoll believes predictive modeling got its start in the personal auto line with the use of credit checks, a variable that had never been used before.
It’s easy for a carrier to use a GPS device in a private automobile to capture all the information and produce scores on the driver’s driving habits. For commercial fleet operators, the value is different. The devices not only manage driver behavior, but pass on data about driver logistics and fuel efficiency.