Premium rating for personal lines coverages in the United States

Document description

The United States has a population of over 230,000,000 living in nearly 100,000,000 homes and owning approximately 150,000,000 motor vehicles. The Property and Liability exposures of this population are covered by nearly 3,000 insurance companies (Life, Accident and Health coverages are provided by less than 2,000 companies), and Property-Liability premiums are approaching the $100,000,000,000 mark. Consequently, by pooling their resources the insurance industry of the United States has access to the largest bank of data on relatively homogeneous risks in the world. The difficulty with having a large amount of reasonably homogeneous data readily available is that forces operate to tear off pieces which are even more homogeneous. For example, Massachusetts drivers are perceived to be distinctly different from Connecticut drivers by the respective state legislators, regulators, and the drivers themselves. By extension, fifty separate states leads to fifty separate regulators supervising fifty slightly different insurance programs developed by fifty separate legislatures. Certain insurance companies perceive the possibility of skimming the cream off the automobile insurance marketplace and, rather than share their secret formulas for detecting superior risks with their competitors, drop out of the information pool. Young male drivers owning sports cars in Boston are shunned by all insurance companies and forced into state operated assigned risk pools. What remains after all the chunks and bits and pieces have been torn off is still the largest bank of data on relatively homogeneous risks in the world.