Auto Loss Ratios

[KIA]

Hey All,

I'm having a little trouble keeping the auto loss ratios down with a specific carrier.

I was just wondering, how do you guys calculate the expected loss ratios of clients (for new business and rewrites)?

What we have been doing is taking the total payouts to the client, dividing by the # of years, and then divide that by current premium.

However, this hasn't exactly been working out with a specific carrier of ours. For reference, we have about $1.5M of premium with them, of which about $1.1 is Auto. I know they are waiting for some subrogations to come in, but still...

I have been rewriting the bad apples as I see them, but I think my problem lies in the quantity of the claims as there aren't too many big ones, but just lots and lots of small ones.

Any advice?

Thanks so much in advance!

 

[nyc2phi]

Hey All, I'm having a little trouble keeping the auto loss ratios down with a specific carrier. I was just wondering, how do you guys calculate the expected loss ratios of clients (for new business and rewrites)? What we have been doing is taking the total payouts to the client, dividing by the # of years, and then divide that by current premium. However, this hasn't exactly been working out with a specific carrier of ours. For reference, we have about $1.5M of premium with them, of which about $1.1 is Auto. Loss ratio last year was 96%. So far this year, it's already at 110%. I know they are waiting for some subrogations to come in, but still... I have been rewriting the bad apples as I see them, but I think my problem lies in the quantity of the claims as there aren't too many big ones, but just lots and lots of small ones. Any advice? Thanks so much in advance!

Does this carrier have any specific guidelines for their auto?

You could be a bit more selective who you put with this carrier and create you own. Like turning down anyone with two or more at-faults in a certain time period.

I'm sure a bit more upfront underwriting can help

 

[KIA]

They do, and we do have our own. Seems not to be enough.

I was just wondering if you guys had any particular guidelines you used in examining your prior losses.

 

[insurance1822]

Maybe their rates are inadequate? Your rep should be able to dissect your book down to the T. Is a large % of your book with them in their subpar tiers? How does your book compare to others in your area? How's your 5 year loss ratio?

 

[zacharyp]

Apart from the aforementioned underwriting, I would work with your carrier rep on checking on a few different aspects of the book. Specifically, how does your avg written premium per policy, frequency of claim and claim amount compare against the rest of your state (or most relevant geography).

Potential solutions would be to see if any policies need their coverages raised (resulting in higher premium), or if there is an opportunity to speak with the insureds about increasing their deductibles (decrease in claim activity).

Has this been on ongoing issue for more than one year? Or could this have been caused by a large claim? On a $1.2MM book, it only takes one or two large losses to really disrupt the loss ratio.

 

[insurance1822]

Is that an uncapped loss ratio? We write nothing less then 100/300 across the board UM/UIM included & over time you're adding 20% more premium to your book that insulates your loss ratios...thus protecting our fat bonuses year end.

If your frequency is that high, you either have terrible luck, the carrier is too wide open OR you're writing risks you know you shouldn't.

Our group has the highest compliance with Safeco for writing the correct type of business (packaged home/auto, 100/300, no more then 1 AF in last 3 years) and our loss ratio reached the 80's on uncapped losses. Capped it was more towards upper 60's BUT the bottom line is their rates are simply insufficient. They came in & bought market share & they're feeling the pain. They were under priced & we wrote so much premium with them that we're having an imbalance between unearned/earned premium to balance the losses..

Until they take sufficient rate the problem won't correct itself.

 

[nyc2phi]

Is that an uncapped loss ratio? We write nothing less then 100/300 across the board UM/UIM included & over time you're adding 20% more premium to your book that insulates your loss ratios...thus protecting our fat bonuses year end. If your frequency is that high, you either have terrible luck, the carrier is too wide open OR you're writing risks you know you shouldn't. Our group has the highest compliance with Safeco for writing the correct type of business (packaged home/auto, 100/300, no more then 1 AF in last 3 years) and our loss ratio reached the 80's on uncapped losses. Capped it was more towards upper 60's BUT the bottom line is their rates are simply insufficient. They came in & bought market share & they're feeling the pain. They were under priced & we wrote so much premium with them that we're having an imbalance between unearned/earned premium to balance the losses.. Until they take sufficient rate the problem won't correct itself.

What's the difference from capped and uncapped?

 

[KIA]

^^,

What IS the difference between capped and uncapped? By capped do you mean not including reserves? Because my rate includes reserves and isn't limited to anything.

It's kind of a 2 year problem with them so far :(

 

[insurance1822]

Capped would mean your large losses are capped at a certain point (aka don't count against you after say 100k.)

It's a way to back out severity to get a different picture of the book. AKA if you have a $1,000,000 book with (2) $300,000 BI claims (assuming you're running a 40% loss ratio all year...) your uncapped loss ratio would be 100% but your capped ratio would be a more clear picture of what the book is doing less the large losses.

 

[F150]

Have your carrier rep get you a list of the claims, you might be surprised, a handful of people are having multiple claims that add up, move them to a different carrier (that doesnt pay you bonuses)