Verisk Analytics announces a new addition to the ISO RiskAnalyzer suite of predictive modeling tools for more accuratepricing of physical damage coverages for personal autos.

The ISO Risk Analyzer Personal Auto Vehicle Module is ananalytic tool that uses vehicle characteristics to predictcollision and comprehensive losses at a highly refined level. Thevehicle module represents a significant evolution in the refinementand accuracy of vehicle Symbols and vehicle rating.

"For decades, Verisk's ISO subsidiary has provided tools tounderstand how the car a person drives affects insurance risk, saysKevin Thompson, senior vice president of insurance services at ISO."ISO is now revolutionizing these tools with the introduction ofpowerful analytical methods and extensive data on vehiclecharacteristics. The vehicle module will provide unparalleledinformation to insurers about vehicle risk."

The vehicle module contains two levels of output—ISO RiskAnalyzer personal auto symbols and more detailed component-leveloutput.

Personal auto symbols provide more than 400 symbols andcorresponding rating relativities for comprehensive and collisioncoverage. The new symbols are two characters in length, composed ofa "price new" character and a "vehicle attribute" character.

ISO derives the ISO Risk Analyzer Personal Auto Symbols usingindividual vehicle attributes, such as body style, and performanceand safety features, as well as information related to themanufacturer's suggested retail price (MSRP). The new symbolsrepresent the combined predictive power of hundreds of vehiclecharacteristics distilled into a compact symbol representation.

"ISO Risk Analyzer Personal Auto Symbols are significantly moregranular than ISO's current Symbols, in part due to the morerefined treatment of vehicle series and the use of actual vehiclecharacteristics in the modeling," says John Kollar, vice presidentof personal lines, increased limits, and rating plans at ISO. "ISORisk Analyzer Personal Auto Symbols bring the power of predictiveanalytics to physical damage vehicle rating and allow you to easilyenhance your vehicle rate-segmentation capability."

ISO plans to file ISO Risk Analyzer PersonalAuto Symbols with insurance regulators in most states. The filingswill introduce an alternative rating rule that insurers may licenseand adopt.

In addition to the auto vehicle symbols, the vehicle moduleprovides outputs to aid insurers in their loss prediction andinternal modeling. Module output consists of loss relativities andcomponents, with separate frequency and severity models built bycoverage for collision and comprehensive. Comprehensive coverage isalso modeled by peril.

For each coverage, the set of relativities provides lossindications for the three major facets of each model: price new (orMSRP), model year, and vehicle characteristics. The relativitiescan be used in conjunction with the new symbols to provide refinedestimates of insured losses.

Components are groupings of input variables constructed from VINinformation and a number of data sources. They represent powerfulcombinations of specific loss-related vehicle attributes. Thecomponents can be thought of as "super variables" that an insurercan use directly as inputs in their own predictive modelingefforts.

"One of the best things about how we have constructed theproduct is that you can use the output of the vehicle module asstand-alone analytics to help classify, segment, and price yourvehicle physical damage risks with confidence," says DavidCummings, vice president and chief actuary of ISO InnovativeAnalytics. "Or you can use the components as input to jump-startyour own customized model, taking advantage of ISO's extensive dataacquisition, preparation, and variable selection work that isnecessary to build a reliable model."