Delaware Business Insurance Update by CNC Insurance Associates Inc. "Predictive Models Not To Predictive" 11-10-13

Predictive modeling is common in insurance underwriting. Insurance companies use computers to analyze data about each customer, with other variables, to predict the chance of loss. These technical "magic beans" are suppose to help insurance companies become more profitable. However I just looked at insurers combined ratios through 3 quarters of 2013 and there are a lot of insurers not making any a whole lot of money on underwriting. As a matter of fact the majority of insurers are barely breaking even. I have been in the business a long time and today's combined ratios are no better than when underwriters used their experience and expertise to predict losses back in the day.  The predictive models are not really making much of an impact in my opinion. Millions of dollars are being spent by insurance companies to perfect these computer models in hopes to squeeze out more profit. I think the only profit advantage that these predictive models will give are the payroll reductions as the computer replaces the underwriter. My prediction from my  "predictive model" is that computers will do no better than humans when it comes to making a profit on predicting risk. Until next time be careful out there and know your risks.

By G. Kevin Nemith President of CNC Insurance Associates, Small Business Insurance Center
Serving DE, MD, PA, NJ, & VA
www.cncinsurance.com
www.bizinsurancetv.org

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