There is no question most carriers can slice and dice their data in every way imaginable. With teams of data scientists employed by most carriers and teams of folks designed to find points of profit, every agency owner should understand that their agency is always on a spreadsheet that details every metric and agency behavior. In fact some carriers can look at every change you make while you progress forwards and backwards through a quote and draw mathematical conclusions about every single agency/ producer behavior. (Think Money Ball- Brad Pitt and the Oakland A’s) Most carriers can and do track more metrics than you could possibly imagine. After 17 years, I am still shocked at what they can track.
Today, I want to help you (AND YOUR STAFF) understand some of the common metrics carriers look for, that get them excited to work more hands on with their ENTIRE distribution channel across the US. (Carrier Reps do more than provide and review production reports- they often have the directive to identify and sometimes discipline with the help of Product Managers and Data Analytics teams) We will then walk through our top four carriers (Nationwide, Progressive, Safeco, and Travelers), and detail very specifically what they have identified as some of their key metrics as they relate to their own outlier reports. Rex, Young, and I firmly believe, more informed agents are more profitable agents.
This series of emails will evolve through three stages, Information (today’s communication), Awareness, and Action. Awareness, will be an email that you might receive if you or your agency are identified as having some of the outlier metrics detailed below (I am going to use 2019 YEND data from the carriers to identify those agencies). It might not suggest you are on a bad path, but help make you aware that your agency has displayed behaviors historically that get you identified from time to time. The Action step will be additional and very specific information to your agency and only sent if carriers and PGI feel as though further understanding and action steps need to be taken to assure resolutions are made to make changes.
Generally speaking carriers look at the large buckets of metrics that cause a carrier significant “premium leakage”. Some of those buckets could include but are certainly not limited to:
- Unlisted Drivers
- The percent of accidents that include an unlisted driver
- Number of drivers listed to Cars Listed
- Discounts that have been applied that will fall off for numerous reasons (More to come on this)
- Discounts used to a degree that shows your agency as a clear outlier when compared to the rest of the distribution channel at a state or national level.
- Example: Marriage discount or the percent of Foreign Driver licenses in the agency
- Placing business within the general appetite of the carrier within their desired segment of the Insurance Spectrum.
- For a refresher please see (https://www.youtube.com/watch?v=1fQkN0Qm7Dg&t= )
- Agent actions that disrupt the client experience with the carrier
- Example: Signing the client up for ESignature documents or a paperless discount, but not collecting an email.
Again the possibilities are limitless and most carriers have the resources to see your agency in every conceivable way.
The four largest carriers have some unique outliers that they look at in addition to the examples listed above (and so many others). Below I will detail their unique metrics and outliers they consider of particular importance, to help you control your mix of business and therefore help decrease your LR and increase your profit margins. I SHOULD NOTE that sometimes carriers are not perfectly aligned throughout departments on a risk by risk basis. It is possible that you could call an Underwriter and get an answer of eagerness and eligibility. In today’s world of ALGORITHIM UNDERWRITING/ pass through rates/ and Eligibility, the industry still needs agents playing a proactive roll in FRONTLINE UNDERWRITTNG.
There is one more high level and notable metric I want to address before diving into the carrier specific metrics. The topic “Storm Load” and its relation to Loss Ratio. Often times early in the year an agency owner looks at their Loss Ratio, sees a 50%, and they get excited about their profitable book or they are proud of the quality book they have created. Often times the agent is tricked into thinking that a 50% loss ratio is a good thing, but then the seasons change, the world starts to warm up, and their clients experience wild fires, earthquakes, hurricanes, hail, wind, floods, and so many other events that impact their profitability. (They don’t take into account the “Storm Load”)
Simply put, agents in states where the “Storm Load” is heavy should strive for a LR in the low 20’s, prior to the month of June, as they can realistically expect a heavy peril season that will naturally and systematically increase an agencies LR year after year. Agents need to look at profitability different in peril prone states to account for the “Storm Load” that will occur. – Our next communication- Awareness – will include step by step, screen shots of how to find and pull your Loss Ratio.
The Carrier Specific Metrics:
Nationwide has two specific outliers they track aggressively.
The first outlier Nationwide tracks is that of policy transactions that don’t originate within the Comparative rater. They want to see this metric under 10%. This might warrant some explanation. It is a common business practice for carriers to control their mix of business by pulling levers within the comparative rater. (This was a topic of a recent video we made - https://www.youtube.com/watch?v=na9uRagXing&t=7s ).
Nationwide and many other carriers pull levers to control their mix of business. Often carriers created a significant line of defense that controls the ultimate mix of business within the comparative rater environment. Naturally tracking who is not going through the “normal agency process” as the carrier understands it becomes a leading metric to track, as that agent might then be more prone to place business with the carrier they ultimately do not want. As an agent better understands this, they can better understand why a carrier might be as aggressive as they are in controlling this specific metric.
Below is one example of what the message looks like in the comparative rater when they are politely asking you to go somewhere else with the risk:
Important note: Sometimes an Underwriter might not be aware that Product Managers and State Management are working on specific metrics and taking certain actions. You might call and Underwriter and get an answer that disagrees with what you are reading here. They are not wrong, they simply might not have direct and consistent access to the Product Manager and possibly unaware of the tactics being employed on a risk by risk basis by other departments.
The second main outlier that Nationwide tracks is when the Proof of Prior (POP) information that their system finds and brings back on the auto product is overridden or when the agents lists, “No Need for Prior”. This is often done in agencies writing low limit mononline auto, or writing monoline auto policies coming from dealerships- this is not always the case. The expectation on this metric is to never override the information the system finds. It sounds like a high bar but the overwhelming majority of the PGI Nationwide agents have a perfect 100% score on this.
Carriers pay a great deal for this added feature in the quote process. Is it perfect? No. Can an agent have details that show what the Proof of Prior (POP) really is? Yes. But when it is overridden aggressively there are quality, profitability, and consumer experience issues (Uprates).
Progressive is arguably the most sophisticated carrier capable of tracking anything. They often identify outliers as it pertains to the onboarding experience of the customer. (Often times they track agent behaviors that are not necessarily bad, but they track steps that the agent did or did not take that would impact the customers experience with Progressive and your agency. An example of this was provided earlier when I mentioned Progressive’s concerns as they relate to agent outliers who give a paperless discount or setting the client up for Esignature when a client’s email is not collected or provided. (% of Sign intended/ No Sign and % of paperless fail)
As it relates to your Progressive loss ratio, they too have similar feelings about what data they are paying to return and what is being overridden by agents, namely, verifying Proof of Prior (% of POP uprate), disclosing all members/ drivers in the household (% of Additional Driver Discovery), and length of vehicle ownership (+5). Progressive’s metrics and benchmarks are proprietary, and they asked that they not be shared outside of the PGI family.
- Additional driver discovery (1%)
- % of policies that require manual follow up to confirm proof of prior insurance and POP Uprate (3.9%)
- Unverified multi policy discount (12.7%)
- Length of vehicle ownership 5+ years (32.5%)
- Paperless failure rate is (27.6%)
- The benchmark for e-signature (22.6%)
Because they desire that our mutual clients to have a smooth onboarding process they also have metrics that detail how well an agent does at verifying multi policy discounts.
Each of the categories listed above to varying degrees gets to the heart of two issues: uncollected premium and or pricing that does not properly reflect the risk.
Safeco is the black box. The important thing to understand here is that they have a Special Opps team that is responsible for “Agency Performance Management”. We are fortunate that we have additional resources from Safeco that allows them to review every PGI agent monthly on over 87 variables. If and when triggers alert their system, a deeper dive is then warranted and Safeco then looks at every imaginable detail as it relates to quote and issue behavior at your agency. I am happy to report that the last deep dive Safeco did was about six months ago and it detailed the behaviors of a meticulous agent.
Below is an Example of their predictive modeling however as you read the example bear in mind that opposed to a traditional reviews, loss ratio is a minor factor in their weighting. The whole concept of 'predictive' is to get in front of the loss ratio before it is a problem by identifying attribute variances compared to unique benchmarks across the country. (Peer to peer / Urban vs Rural / State to State / Town to town)
The APM team benchmarks you to other agents in your area/ size of agency/ peer group. As such, those benchmarks move. From there they identify major outliers from the peer group. Some heavier weighted categories include Education/Occupation and Low millage. To play this example out further. If you were in a small town that had four Safeco appointed agents and in that town and surrounding area, 50% of policies had a Bachelor’s degree listed, but your agency had 90% of policies listed as having a bachelors degree, that would warrant a deeper look. These metrics change from town to town, state to state, Rural to urban.
They also look for signs of quote manipulation such as deleting accidents or adding homeowners discounts when the address is an apartment complex.
Travelers – What is being discussed in this communication is always moving and fluctuating. There is no better example of this than what occurred this very week with Travelers. Up until this week, Travelers has had one significant hot button that they tracked ever so closely for over the last two years! In addition to everything previously stated, it again tied to data being purchased and Travelers understanding/assumptions of the client before they came to Travelers.
They have a category of business that they feel performs to a less profitable degree than other risks. This is segment they call: Near Non Standard or New Non Standard depending on who you ask and when you ask. NNS is defined as new polices with Travelers that have one or more of these attributes:
- No prior insurance
- Prior insurance with a nonstandard company
- Driving activity
- Drivers with a lapse in coverage.
Historically Travelers would identify and help make you aware if your mix of business was over 10% as it relates to NNS. (I am sure you can imagine scenarios when there is a reason for healthy pushback. Rest assured we do this often and when appropriate. Think of the time you wrote a beautiful package (Auto, Home, Umbrella, and rental property) from the local captive agent who had the auto at minimum limit) – AS IT STANDS NOW CONSIDER THIS A METRIC THEY ARE STILL AGGRESSIVELY MANAGING.
This week is a perfect example of how carriers shift their focus over time, as carriers get more data, resolve possible weaknesses in their pricing algorithms, and sure up possible weak points in the product.
As recent as just days ago, Travelers has retooled their focus on other categories they feel are more indicative of a deteriorating LR, specific client behaviors that are indicative of a higher losses, or agent behaviors that might need attention. Travelers additional focus will look at the following metrics with more intensity in the future:
- Percent of clients coming to Travelers with a Lapse in coverage (Previous client behavior)
- Percent of clients that cancel within 90 days (Discounts falling off, uprates, bumpy onboarding)
- Percent of Monoline (Look back to the Nationwide section)
- Auto retention (Renewal business is more profitable than New business by as much as 12% points of profit)
- Higher monthly direct bill (Clients that demonstrate financial behaviors that suggest a higher Insurance score)
Because this is so new, expect to see more details as it relates to Travelers in the near future.
In closing, every carrier is doubling down on data analytics. Above I detail the top four PGI partner carriers’ unique concerns and or some of the metrics they use to understand you, your behavior, and your loss ratio to an astounding degree. Understanding their perspective and them understanding yours is what makes a true partnership. So the next time you hear from Nationwide about overriding the proof of prior because your client was with AAA; well, you might have a good reason as to why you did what you did and your powerful partner will work to understand that specific situation.
You, have access to many more carriers in all geographies imaginable across the US. It is imperative to understand (Often) what each one wants from you, in detail, locally. Go ask them.
Let me end by stating, every industry data point will suggest that there are attributes that make agencies/ customers more profitable (VS Less). I invite you to focus on these attributes to enhance your agencies Profit:
- Higher credit/ Insurance scores (Currently the #1 rating factor because it is the most predictive of a good LR)
- Clients willing to plug in Telematics (Studies show that number is WAY higher than how often Independent agents use it. (SOON to be the #1 rating factor)
- Writing clients that understand, want, and need higher limits (simply writing higher limits does not make a book more profitable)
- Package business (More lines make the client more sticky and retain better)
- Clients that retain longer (There is a new business tax as it relates to profitability. I have heard/ seen data that suggests it is as high as 12%)
- Clients willing to go on EFT.
- The accurate amount of WP for an accurately defined risk
Carriers are open for business, they want your at bats, they want business that fits who they are and what their appetite is!
As mentioned prior there is so much more to come in the days and weeks ahead. If you have any questions. Please let me know.
Shawn Michael Walker
Independent: Free from outside control; not depending on another’s authority.
Synonyms: Liberation, Freedom, Unconventional)
Captive: A person who has been taken prisoner, confined, or kept under restraint.
(Synonyms: Prisoner, Jailbird)
The Insurance Spectrum Part 1 – click to watch
The Insurance Spectrum Part 2 – click to watch