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Progressive Use of Credit

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					Progressive Use of Credit
     Iowa Algorithm A21
   (Effective June 6, 2003)


    Farm Bureau Actuarial Meeting 2004
               Dale Brooks
  Why Look At Progressive?
# 3 personal auto writer
Combined ratios <100
– 2002   92%
– 2003   87%
– 5/04   84%
Growth of In Force Policy
– 2002 24%
– 2003 18%
– 5/04 Annualized 13%
10 Year premium from 2.5B to 11.9B
Progressive’s Insurance Score
Financial Responsibility Bands
Low Number is GOOD
             27 Bands
18 scored (highest score = high rate
(H))
4 no hits (includes thin files)
– By age 0-53 (H), 54-60, 61+
– Older no hits for renewal (H)
2 PNI (Excluded (H), Youthful)
Bypass (Disputed items)
Credit Ineligible (H)??
Not authorized to order Credit (H)
     Scored Credit Bands
Range 49 to 228
Low score is good
Base 100 – add & subtract from
there
Use 9 credit items
         Score Elements
Age of oldest Trade Line (months)
   Missing    +16 points
   0 - 12     +32
   13 – 60    +18
   61+        0
      Score Elements (cont)
  Age of person when 1st trade opened (yrs)

Age           Points     Age     Points
<15           0          36 – 40      +9
16 – 20       -9         41 – 45      +12
21 -25        0          46 – 50      +18
26 – 30       +3         51+          +12
31 – 35       +7
    Score Elements (cont)
Age of Most Recent Auto Trade (in
Mo)
– Missing      +2
– 0 to 11      0
– 12 to 47     -7
– 48+          -9
    Score Elements (cont)
Number of Current Satisfactory
Trades
Missing       +22
0             +22
1             +11
2             +8
3             +3
4             +1
5+            0
    Score Elements (cont)
# of Trades ever with Delinquency
Rating 30 days late or greater
Missing       -8
0             -8
1+            0
    Score Element (cont)
# of Installment Trades more than
120 days past due
Missing       0
0             0
1-5           +8
6+            +16
     Score Element (cont)
Ratio of Total Balances to Total High
Credit for All Non-Closed Trades
 0 – 94%       0
 95 – 99%      +3
 100%+         +8
Missing        +7
     Score Element (cont)
Ratio of Revolving Trade Balances to
Total High Credit for all Revolving
trades
 0 – 9%       -6 points
 10 – 19%     -4
20 – 39%      0
40%+          +4
Missing       0
Number of Non-Insurance Inquires
 Missing   -19   5        +3
0          -19   6        +6
1          -14   7        +10
2          -10   8        +13
3          -3     9 -11   +20
4          0      12+     +34
Progressive Credit Score Summary
 Base of 100 + or –
 + or – from 9 credit items
  ChoicePoint Attract HO-3
Ins Score = a(Score1/Score2-b)2 +c
a, b, c from table based on Score1/Score2
Score1 = e(C1+V1) -1
Score2 = C2 + V2
C1 = 1.0563, C2 = 360.2038
V1 – sum variable amount for 7 credit
items
V2 – sum variable amounts for 19 credit
items
     How FR Tier is Used
Market Tier
Driver Matrix
Market Label (Determination)
Core Discount
    Market Tier - Factor
Underwriting Tier
Financial Responsibility Tier
     Market Tier Factors
Vary by Coverage, U/W Tier & FR
Tier

               Range
BI/PD          .41 to 1.42
Comp           .36 to 1.89
Coll           .36 to 1.54
Med, UM/UIM    .25 to 1.56
       Underwriting Tier
Proof of Prior Insurance (days lapse)
Prior BI Limit
# of Comp claims >$1,000
          Driver Matrix
By coverage
By Age of Driver
By Points (accidents & violations)
U/W Tier
Financial Responsibility Tier

Is multiplied times class factor
Market Label (Determination)
5 Levels
– Non-standard
– Mid-Market
– Standard
– Preferred
– Ultra
Underwriting Tier
Financial Responsibility Tier
Market Label (Determination) Use
Child away at school discount
Minor Child discount (named insured
with company 24 months)

Direct company (Halcyon)
 – Expense constant
    143 to 209 annual basis
        Core Discount
By Coverage
By Multi-car
Paid in full
Home/mobile home ownership
Underwriting Tier
Financial Responsibility Tier
            Summary
Progressive Rating Structure
complex and use of insurance score
complex.
Progressive’s calculation of insurance
score is much simpler than
ChoicePoint.
 Progressive Unique Factors
Average Class Factors
Home Ownership Discount
Paid in Full Discount
Separate Terr Definitions by Cov.
Pioneer in Rating for Make and Model
for Liability
Highly segmented Classes by age of
driver
 Progressive Claims Center
New Concept
All Policyholders must carry Auto
Rental
In the event of a claim, policyholder
brings car to Progressive Office
Progressive gives them a rental car
Progressive arranges to get car
repaired and returned to policyholder

				
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posted:8/25/2011
language:English
pages:27