Part Three: Sources of Underwriting Information

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Part Three: Sources of Underwriting Information

[edit] Subjective (“Soft”) Sources

In most PPA policy sales, the applicant provides information to the company, either directly or through an agent. This information is generally used to give an initial quote, pending verification using outside report providers.

The information provided by the insured is valuable in its own right, particularly when processed by an automated underwriting system. Companies will generally add incidents reported by an applicant, particularly accidents, even if they do not appear on third-party reports. (As discussed in the section on MVR quality, many accidents do not appear on MVRs. Admission of accident involvement by an applicant is sufficient to charge for it).

Information given by an applicant is of much more value within the context of an automated underwriting system. There is a qualitative difference between a policy charging for (as an example) two accidents and three moving violations which were discovered only through outside reports and a policy with the same attributes that were admitted to by the applicant. Many insurers who do not track the sources of violations and accidents on their policies deem this distinction irrelevant. Other companies have begun to track this information and are developing a powerful new tool to segment and price risks.

Agents are also valuable sources of underwriting information. In the independent agency environment, risks are frequently moved from one company to another at renewal. Agents may also submit risks to carriers as a result of policy cancellation or non-renewal by another insurer. Companies that encourage their agents to provide information in the agent’s possession about an applicant provide an easy way for the agent to provide it, and design their automated underwriting systems to make use of it, will gain an underwriting advantage. This will be discussed in more detail in a later section.

[edit] Third-Party Reports (“Hard” or “Objective” Sources)

There are three primary types of objective underwriting data – MVRs, claims history reports, and other third party information products.

MVRs

Motor Vehicle Reports (or Records) are provided by the various state Departments of Motor Vehicles. As discussed previously, some states allow real-time, instant access to the MVR database and some do not. Some states will allow companies to submit requests for reports directly, while others supply reports only through intermediaries.

There are a very few large report providers utilized by most of the insurance industry. For a fee, these intermediaries offer a number of advantages, including:

• A single order point for MVRs from all states

• No administrative issues of dealing with multiple state DMVs

• Management of report follow-up for non-interactive states

• Standardization of state reporting into a single format

• Simplified billing and accounting

• Archiving of reports ordered by an insurance company

• Intermediaries may maintain their own databases of recently ordered reports, which they offer to carriers at a discount to new reports direct from the States.

• Easy ordering of large batches of MVRs, such as for upcoming renewal policies.

Claims History Reports

The same companies that serve as MVR order points also maintain proprietary databases of claim information submitted directly to them by insurance companies. Companies wishing to order reports from the database are generally required to submit detailed information on the claims they pay to be eligible to do so.

Accident history reports provide a high degree of objective information about accidents unobtainable elsewhere including amounts paid and the coverages under which payments were made, to both the insured and third parties. These reports will also indicate amounts for open claims, information about subrogated claims, and information about claims possibly related to the applicant being inquired about.

Other third-party information products

• A variety of additional information products is also offered. These include reports about…

• additional drivers at a given address

• information about the title history and/or accident history of specific vehicles by their VIN numbers

information about all vehicles associated historically with a given individual.

Other public sources of information

Local and state police departments often provide accident reports.

State DMVs can also provide information about vehicle registrations.