Tag Archives: Insurance Journal

Personal lines coverage evolves with exposure data tracking

Increasingly, individuals are having their driving habits and living environments monitored electronically. A recent Insurance Journal article cited Milliman’s Sheri Scott discussing how exposure data tracking is shaping new underwriting practices for personal lines coverage like auto insurance.

Here’s an excerpt from the article:

Exposure tracking and the advent of autonomous vehicles are shifting personal auto insurance risk exposure from dependence on driver skills, estimated distances driven and garage location to the precise determination of vehicle locations, driving habits, driving distances and traffic conditions, all determined through the collection of trip data gathered in real time.

Yet even these underwriting considerations will soon be supplemented, if not supplanted, by the loss experience of automated vehicles and their manufacturers.

This transformation will not be without risks of its own, Scott said. In particular, she cited disruption of networked communications as a hazard, especially as vehicle occupants become dependent on automated control and less practiced at taking control of a vehicle.

“If some kind of communication goes down, there could be a very serious occurrence,” she said.

Considerations for sports and entertainment insurance

Individual sport and entertainment attractions have distinct insurance needs that make traditional actuarial and underwriting approaches insufficient. Insurers needs to customize policies according to the unique risks present at different events.

In the article “Insuring a lazy Saturday afternoon: Insurance for entertainment,” Milliman’s Will Carbone uses a hypothetical family outing to frame the distinct insurance needs associated with a county carnival and a baseball game. Here is an excerpt:

On Long Island, traveling carnivals pop up in parking lots all summer long, attracting kids of all ages and fans of Americana. On this sunny Saturday, I packed up the family and we headed down to the train station, the site of this weekend’s festival. My oldest son let us know definitively that our first stop would be the bouncy houses he loves so dearly. Much to our dismay, this particular carnival had all sorts of rides, games, and food, but did not have a single inflatable attraction. “Where is the bouncy house?!”

“Well, not all carnivals have the same rides,” I tried to explain.

This example highlights the difference between providing coverage for traveling carnivals, theme parks, and other one-off facilities compared with a franchised location. With few exceptions, each of these entertainment spaces was tailored to maximize profit.

For small, mobile operations, this means selecting the rides and games that will make them attractive to the host facility. For the insurer providing cover for the carnival, this means that the pricing needs to be done on a more granular level. Typically, the approach is to price the coverage for each attraction rather than for the collective carnival. A premium is determined for each attraction, and the cost of coverage is based on the sum of the premiums for the attractions at the carnival. This simplifies the underwriting efforts as a unique quote is only needed once for each attraction and does not need to be tailored to each insured.

Pricing individual rides becomes difficult when the ride itself is a unique risk. Larger scale operations seek to provide the big thrill that will draw in crowds. Those big thrills are coming not from tried-and-true roller coasters but from the cutting-edge rides that are considered a “one-of-a-kind” experience. By definition, these rides don’t have a credible history on which underwriters can gather data and price the risk, increasing the challenge of pricing these facilities.