Exploring the Future of Insurance Risk Through Data Integration

Understanding the Role of Data in Insurance Risk Assessment

In the dynamic world of insurance, the integration of data plays a pivotal role in enhancing risk assessment. A recent discussion surrounding this paradigm was highlighted in a complimentary webinar titled, "Stronger Together: How Combining Credit and Public Records Data Can Yield Sharper Views of Insurance Risk," hosted by renowned experts in the field. This 30-minute session shed light on how marrying credit data with public records can provide insurers with a more comprehensive understanding of consumer risk.

Transforming Risk Perspectives with Data Integration

The narrative that emerged from the webinar emphasized the complementary nature of credit and public records data. By utilizing credit as a foundational element, insurers can layer in public records to gain new insights into potential risks. This fusion not only enriches the data model but also aids in determining a more accurate risk profile of insurance applicants.

Key Categories of Public Records Data

During the presentation, experts detailed four primary categories of public records data leveraged by leading analytics providers. The categories include:

• Derogatory data: This encompasses information such as criminal convictions, which can significantly impact risk assessment.
• Non-derogatory data: This consists of positive records like professional licenses that indicate trustworthiness.
• Credit-absent financials: Information regarding short-term loans falls into this category, providing insight into consumer behavior.
• Proprietary data: This includes unique indicators such as address stability patterns, which can reveal further risk factors.

Innovative Concepts in Credit Assessment

Another important topic covered was the innovative concept of "trended credit". Unlike traditional snapshots that look at credit scores, trended credit analyzes 24 months of historical payment behavior. This nuanced approach allows insurers to distinguish between different types of credit users, enhancing their understanding of an applicant's financial responsibility.

Implementing Public Records in Insurance Operations

The panelists discussed effective strategies for integrating public records into insurance operations. They encouraged starting small with manageable underwriting attributes before expanding to more complex rating applications. This method allows insurers to gradually adapt and optimize their risk assessment processes.

Gaining Regulatory Approval for Scoring Models

Participants highlighted the collaborative efforts made by analytics firms and state regulators to achieve approval for new scoring models based on public records data. Adapting to regulatory requirements, particularly in certain states, has been key to the successful implementation of these models.

Benefits of Data Consolidation

The merging of credit data with public records data not only enhances scoring capabilities but also creates opportunities to serve previously "credit invisible" consumers. With these combined tools, insurers can achieve better risk segmentation, paving the way for more personalized insurance products.

Testing Efficacy Before Implementation

A particularly noteworthy point was the emphasis on conducting retrospective analyses. Insurers are encouraged to test the effectiveness of combined data sources on their specific book of business before fully employing these strategies, ensuring they meet their operational needs.

Current Market Dynamics and Strategic Timing

The discussion concluded by addressing the current state of the insurance market. The panelists reiterated the importance of timely implementation of these combined data sources to avoid adverse selection and maintain competitiveness in a rapidly evolving landscape.

Meet the Expert Panelists

The webinar featured contributions from distinguished panelists, including:

• Ellette Burke, product management professional from LexisNexis Risk Solutions.
• Alex Frank, who also holds a position in product management.
• Gary Sanginario, part of the insurance market education team, emphasizing educational outreach.

About AM Best

AM Best is recognized as a global credit rating agency, news publisher, and a provider of data analytics with a specialization in the insurance sector. Operating across over 100 countries, AM Best’s expertise lies in providing insight that assists various stakeholders in understanding market dynamics better. For further details about AM Best and its initiatives, visit their official website.

Frequently Asked Questions

What was the main focus of the webinar?

The webinar concentrated on how integrating credit and public records data can enhance understanding and assessment of insurance risks.

Who sponsored the webinar?

LexisNexis Risk Solutions was the key sponsor of the webinar.

What are the primary benefits discussed in integrating these data types?

The integration provides better risk segmentation, access to previously credit invisible consumers, and improved scoring accuracy.

How can insurers start implementing these strategies?

Insurers are recommended to begin with small underwriting attributes and gradually expand to more complex rating applications.

Why is timing important according to the webinar?

Timing is crucial to avoid adverse selection and to maintain competitiveness in the insurance market.

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