Rethinking the Path to Root Cause: How Mutual Capital Analytics

Revealed the Route to Predicting Loss Performance

 

 

Client’s Situation

Many carriers are currently challenged by significant increases in the frequency and severity of fire losses in their personal and commercial books of business. MCA’s client was having similar fire-loss challenges with their Homeowners book of business. 

Traditional Approach

The client has been using traditional methods to review the losses – primarily having underwriters review files and claims for large losses – to determine the root cause of the trends. With these individual reviews, no trends were discovered. 

The MCA Way — A New Approach

MCA collected five years of policy-level information (insured name, address, construction type, etc.) and matched that information up with historical-loss information, yielding roughly 5,000 historical data points with which to work. They combined the internal policy information with over 900 external 3rd party data points to create a comprehensive dataset with over 7 million data points for analysis.   

Results: Revealing the Root Cause

MCA analyzed the historical loss results against a greatly enriched set of data. The advanced analysis revealed that a 3rd party data provider’s “Fire Score” was the optimal solution for predicting future loss performance. Working with the 3rd party data provider, MCA learned that the variables underlying the score were intuitive–travel time to the location, quality of the water source, and the makeup of the fire department (paid, volunteer, combination). The 3rd party data was of such high quality that it could be trusted by independent agents and underwriters. Ultimately, the predictive power for identifying the outliers of loss ratio was impressive. (See graph below.)

 

 

Practical Application for Future Success

MCA collaborated with the client to develop two actionable applications of these findings:

  • New Business: Fire Score was proactively and consistently used for underwriting review at application to better identify the largest outliers.
  • Renewals: Accounts with the lowest scores were automatically sent to an underwriter to review and propose appropriate action

 

Solutions for a Changing Landscape

The industry is changing, and traditional solutions may leave you falling behind. MCA can assist your Mutual company find hidden opportunities in your data so you perform steadily for the long term. Contact us below so we can enable you to serve your customers and communities better and improve business performance.

 

 

Creative Use of Data + Experience + Curiosity =

Moving Past the Status Quo to Unimagined Solutions