NU Online News Service, Feb. 7, 11:58 p.m.EDT

Commercial lines carriers are looking to tighten the gap betweenthem and their personal lines peers when it comes to the use ofpredictive modeling.

According to Towers Watson's 2011 Predictive ModelingBenchmarking Survey, commercial lines insurers—traditionally behindpersonal lines insurers in predictive modeling use—are adopting thetechnique, with about 70 percent saying they either currently useor plan to use it within the next two years.

The newfound commitment might come from the fact surveyparticipants report the use of predictive modeling is improvingtop- and bottom-line results of companies.

Almost half of all survey-takers say top-line results have beenpositively impacted by predictive modeling use. Bottom-linebenefits of rate accuracy, loss ratio improvement and improvedprofitability all received positive responses of nearly 75 percentor more.

Towers Watson says all percentages related to positive top- andbottom-line impacts are up 10 percent to 20 percent compared tolast year's survey.

The use of predictive modeling by personal lines writers hasbeen no secret, with about 85 percent saying they use or areplanning to use it. The practice hasn't caught on in the commerciallines sector but survey results appear to indicate these writersare jumping on board.

Towers Watson says the number of standard commercial lineswriters using predictive modeling is up from a year ago, and thoseplanning to start programs are in a more robust 25 percent to 41percent bracket.

“The optimism expressed by the senior executives responding tothe survey suggests the range of future uses for predictivemodeling is broad, and will include not only pricing and productinnovation but also new refinements in areas such as underwriting,risk selection, claim applications and target marketing,” saysBrian Stoll, Towers Watson director and the survey's co-author, ina statement.

The reported profitability improvement “encourages P&Cinsurers to find even more ways to extend predictive modelingapplications and further access the benefits it can offer,” headds.

Specialty commercial lines carriers are also recognizing thebenefits of modeling. While only up to 15 percent of carrierscurrently use predictive modeling, between 24 percent and 37percent of specialty commercial survey respondents are looking toadopt it in teh future for pricing and risk selection.