ISO announces that filings have begun for an optional rating rule that uses the output of the by-peril predictive model developed by ISO. The predictive model is known as ISO Risk Analyzer Homeowners. ISO recently began the regulatory filing process and expects to complete the process for several states at a time over the coming months.

ISO Risk Analyzer Homeowners is a set of predictive models that help insurers to classify and segment risks. The environmental module predicts expected losses at a much more refined geographic level than traditional territories. The module also determines expected losses separately by major peril, including wind, fire, lightning, liability, theft and vandalism, hail, water related to weather, water not related to weather, and all other perils for a base risk. In addition, the model can aggregate the by-peril expected losses to an all perils combined basis.

“By predicting expected losses at the policy level by peril, the environmental module of ISO Risk Analyzer Homeowners helps insurers evaluate homeowners’ risks with greater precision and thus enhance accuracy,” says Kevin Thompson, senior vice president of Insurance Services at ISO. Developed with advanced modeling techniques, the environmental module analyzes the interactive effects of hundreds of variables derived from data from ISO and external sources and provides insurers the flexibility to assess and refine homeowners rating with one set of analytic tools.

“This will enable insurers to better classify, segment, and underwrite homeowners risks,” says Thompson.

The environmental module is one of several ISO Risk Analyzer Homeowners modules that insurers will be able to use individually or together depending on their analytic objectives. At this time, more than a dozen insurers are participating in pilot tests to evaluate the environmental module. The other models under development include the rating factors and building characteristics models.

Insurers can integrate the environmental module and future models into their own predictive models or use ISO Risk Analyzer Homeowners as a stand-alone model. To send and receive reports, insurers can choose secure FTP, interactive mainframe delivery, or batch order processing.