ISO: Some SUVs Deserve Kinder Gentler Rating

ISO: Some SUVs Deserve Kinder Gentler Rating

By Daniel Hays

NU Online News Service, April 5, 4:14 p.m. EDT?Not all sports utility vehicles are road behemoths that rack up huge liability claims when they collide with another vehicle, according to Insurance Services Office.[@@]

The Jersey City, N.J.-based firm reported the finding in announcing the release of a rating program that carriers can use to figure the cost of auto liability insurance based on the kind of car the policyholder drives.

The company said insurers can adjust the price for bodily injury and property damage liability and no-fault/medical payments, and more accurately rate individual personal auto risks based on each vehicle's loss potential.

ISO said its new symbols program has been filed for regulatory approval as an alternate rating program in all states except Massachusetts, North Carolina and Hawaii, which have individual state rating programs, and California, Puerto Rico and Texas, where the program will be filed at a later date. The program has already been accepted for carriers' use in 30 jurisdictions.

ISO said the rating plan, based on an extensive analysis of personal auto loss experience, provides surcharges of up to 25 percent and discounts of up to 20 percent against the insurance rates of nearly 300 makes and models of vehicles.

As a credit and surcharge program, ISO said the program is designed to be revenue neutral overall, although an individual policyholder's premiums could increase or decrease based on the make and model of vehicle driven. The company said it will regularly update the program to reflect loss experience data every other year.

ISO said its vehicle make research was prompted by the growing popularity of light trucks, including pickups, sport utility vehicles and vans, and the effect a changing mix of vehicles might be having on insurance losses.

SUVs, ISO said, are the fastest-growing category of passenger vehicles. ISO noted that in 1990, SUVs accounted for less than 7 percent of all noncommercial new vehicles sold, but by 2002, one in every four new vehicles sold was an SUV.

In addition to its analysis of each individual make and model's loss experience, ISO said it examined the correlation between vehicle size, body construction (frame versus unibody) and other related characteristics, such as vehicle length, width, height, weight, wheel base and horsepower, and the resulting insurance loss experience for liability and no-fault/medical payments coverages.

Kevin B. Thompson, senior vice president in charge of ISO's Insurance Services Department said analysis showed size alone "is not a reliable predictor of a vehicle's potential for liability and no-fault/medical payments coverage losses.

"Our findings run counter to perceptions that all SUVs, because of their size and design, inflict greater damage and incur greater liability losses in collisions with other vehicles. A number of SUV models had better loss experience than sedans and other smaller vehicles," said Mr. Thompson.

"This is not an SUV surcharge program. It is not a light-truck surcharge program. It is a rating tool insurers can use to achieve more accurate, risk-specific pricing. It is a vehicle rating plan to ensure everyone pays a fair share for liability insurance based on scientific and empirical analyses of a credible sample of losses," said Mr. Thompson.

The new vehicle rating plan contains two rating symbols for each make and model vehicle?one for bodily injury and property damage liability, the other for no-fault/medical payments coverages. Liability insurance covers the policyholder for damages caused to others.

No-fault or personal injury protection coverage pays medical and related expenses for an insured and the insured's family in the 13 states that have no-fault auto insurance laws.

The new program is an alternative to the standard ISO personal vehicle manual classification and rating system. Carriers adopting the plan will file their rate modifications and effective dates with regulators.

Mr. Thompson said companies will be able to use the program "as is" or by adjusting the surcharge and discount factors. Because incorporating this new symbols plan into company policy rating and issuance systems is a complex process, policyholders are not likely to see rate changes right away, he said.

Details about the new program are contained in an ISO Circular distributed to insurance companies that purchase ISO's personal automobile rules service. A new Liability and No-Fault/Medical Payments Coverage Symbols manual containing the symbol assignment for each vehicle make and model is also available to ISO customers who have elected to receive it. Nonparticipating ISO carriers interested in receiving the new manual should contact ISO.

For carriers choosing the new alternate rating program, ISO has introduced a new VINMASTER automated rating product for liability and no-fault/medical payments insurance.

Like the VINMASTER product for comprehensive and collision coverages, the new VINMASTER database delivers the appropriate rating information for every make and model based on 10-digit vehicle identification numbers.

Under the new ISO rating program, a number of SUVs are seeing discounts for liability, personal injury protection and medical payments coverage.

? Nissan Morano is discounted 10 percent on liability and increased 15 percent on PIP and medical payments.

? Lexus RX 330 is discounted 10 percent on liability and 20 percent for PIP and medical.

? Land Rover Freelander is discounted 5 percent on liability and 5 percent on PIP medical.

? Toyota Highlander is discounted 10 percent on liability and 20 percent on PIP and medical.

? Acura MDX is discounted 20 percent on liability and 25 percent on PIP and medical.

ISO provides information, products and services related to property and liability risk. For a broad spectrum of commercial and personal lines of insurance, ISO provides data, analytical and decision-support products; consulting; data processing; and technical, statistical and actuarial services.

ISO field services include on-site rating and underwriting services and the evaluation of community loss-mitigation efforts. ISO's products help customers with sales and prospecting, underwriting, rating and quoting, customer management, policy administration, product development, claims administration and fraud detection.