SYSTEMS AND METHODS FOR RATING AND PRICING INSURANCE POLICIES

• US 20100063851A1
• Filed: 12/31/2008
• Published: 03/11/2010
• Est. Priority Date: 09/10/2008
• Status: Active Grant

• Current Assignee: Hartford Fire Insurance Company (The Hartford Financial Services Group, Inc.)
• Original Assignee: Hartford Fire Insurance Company (The Hartford Financial Services Group, Inc.)
• Inventors: King, James, Hay, Jeffery T., Andrist, David
• Granted Patent: US 8,725,541 B2
• Time in Patent Office: Days
• US Class Current: 705/4
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

Systems, methods, apparatus, computer program code and means for rating and pricing insurance policies are provided. In some embodiments, an automated insurance processing platform rates and prices insurance policies by including a territory factor in the calculation of a premium for the policy. Pursuant to some embodiments, the territory factor is calculated by receiving historical loss data, geographical data, and demographic data, analyzing the historical loss data, the geographical data, and the demographic data to identify data having similar claim behaviors. The historical loss data is analyzed to identify at least a frequency and severity of historical loss by coverage type. The frequency and severity of loss data, the geographical data, and the demographic data is iteratively analyzed to create a territory set having different geographical boundaries for the different coverage types; and the territory set is used to generate a set of territory factors for the different coverage types and the territories.

Claims

1. An apparatus to rate and price business insurance policies, comprising:

a communication device to receive information associated with a business to be insured;

a processor coupled to the communication device; and

a storage device in communication with said processor and storing instructions adapted to be executed by said processor to;

receive a quote request associated with a business, the quote request specifying a business type and a business location;

identifying at least first applicable coverage;

based on said at least first applicable coverage, identifying at least a first relevant coverage formula including at least a first territory factor, said at least first territory factor based on a geographical location of said business within a State;

query a rating database using said at least first relevant coverage formula, said business type and said business location, said query resulting in at least a first price for said at least first applicable coverage; and

transmit a response to said quote request, said response including said at least first price and said at least first applicable coverage.

2. The apparatus of claim 1, wherein said at least first territory factor is selected based on a zip code associated with said business location.

3. The apparatus of claim 1, wherein said at least first territory factor comprises a plurality of zip codes having at least one of a similar loss exposure characteristic and a similar demographic characteristic.

4. The apparatus of claim 1, wherein said at least first relevant coverage formula is at least one of a building rating formula, a business personal property rating formula, a personal property of others rating formula, a product rating formula, a PREM/OPS formula, a business interruption rating formula, an equipment breakdown formula, a policy expense fee rating formula, and an optional coverage rating formula.

5. The apparatus of claim 1, wherein said storage device further stores instructions adapted to be executed by said processor to identify a coverage type associated with said quote request, said coverage type at least one of a building, contents, business income, and liability.

6. The apparatus of claim 1, wherein said storage device further stores instructions adapted to be executed by said processor to calculate a premium for an optional coverage associated with said quote request, said calculation comprising instructions to:

identify a value of a property associated with said quote request;

calculate a net rate associated with said property and said basic premium;

calculate a premium for the optional coverage as the product of said net rate and said optional coverage amount; and

transmit said premium for said optional coverage with said response to said quote request.

7. The apparatus of claim 1, wherein said storage device further stores instructions adapted to be executed by said processor to calculate a policy expense fee associated with said quote request, said calculation comprising instructions to:

determine a likelihood of the business incurring an administrative expense;

calculate, based on said likelihood, a policy expense fee; and

transmit said policy expense fee with said response to said quote request.

8. An apparatus to create territory factors for use in pricing insurance policies, comprising:

a communication device to receive historical loss data, zip code data and demographic data;

a processor coupled to the communication device; and

a storage device in communication with said processor and storing instructions adapted to be executed by said processor to;

analyze said historical loss data, zip code data, and demographic data to identify one or more significant geographical variables and risk characteristic data;

adjust said historical loss data to remove the effects of said significant geographical variables and said risk characteristic data;

smooth said adjusted historical loss data using a smoothing algorithm;

combine said smoothed data with said significant geographical variables and said risk characteristic data;

iteratively cluster said smoothed data into zip code groups having similar risk exposure data; and

assign a territory factor to each of said zip code groups, each of said territory factors for use in pricing insurance policies issued to insured entities located in said zip codes.

9. The apparatus of claim 8, wherein said insurance policies are selected from the group consisting of:

a business insurance policy, a personal lines insurance policy, and a homeowners insurance policy.

10. The apparatus of claim 8, wherein said instructions adapted to be executed by said processor to iteratively cluster said smoothed data further comprises instructions to:

conduct a first analysis of each of said zip codes in a State and said risk exposure data to identify a first set of zip codes proximate each other having similar risk exposure data.

11. The apparatus of claim 10, wherein said instructions adapted to be executed by said processor to iteratively cluster said smoothed data further comprises instructions to:

conduct a second analysis of each of said zip codes in a State and said risk exposure data to identify a second set of zip codes proximate each other having similar risk exposure data; and

compare said first analysis to said second analysis to determine a most appropriate grouping of zip codes.

12. The apparatus of claim 11, wherein said instructions adapted to be executed by said processor to iteratively cluster said smoothed data further comprises instructions to:

conduct a third analysis of each of said zip codes in a State and said risk exposure data to identify a third set of zip codes proximate each other having similar risk exposure data; and

compare said third analysis with at least one of said first analysis and second analysis to determine a most appropriate grouping of zip codes.

13. A system for generating rating tables, comprising:

an analysis module to analyze historical loss data, zip code data, and demographic data to identify one or more significant geographical variables and risk characteristic data for a territory;

a data smoothing module, to remove said one or more significant geographical variables and risk characteristic data to form an intermediate data set, to apply a smoothing algorithm to said intermediate data set forming a smoothed intermediate data set, and to recombine said one or more significant geographical variables and risk characteristic data with said smoothed intermediate data set to form a second intermediate data set;

a clustering module, to iteratively cluster said second intermediate data set into zip code groups having similar risk exposure data and to assign a territory factor to each of said zip code groups; and

a rating database, for storing said zip code groups and said territory factors for use in pricing insurance policies issued to insured entities located in said zip codes.

14. The system of claim 13, wherein said analysis module receives data from one or more data sources including at least one of a zip code database, a census database, a historical loss database, and a climate database.

15. The system of claim 13, further comprising:

a quoting module, for receiving a quote request from an agent terminal, said quoting module querying said rating database to receive a territory factor associated with said quote request.

16. The system of claim 15, wherein said quoting module causes the selection of at least one coverage formula associated with said quote request, the at least one coverage formula comprising at least one of a building rating formula, a business personal property rating formula, a personal property of others rating formula, a product rating formula, a PREM/OPS formula, a business interruption rating formula, an equipment breakdown formula, a policy expense fee rating formula, and an optional coverage rating formula.

17. The system of claim 15, wherein said querying said rating database is triggered by said selection of at least one coverage formula.

18. The system of claim 15, wherein said quoting module causes the selection of a policy expense fee rating formula, the policy expense fee rating formula causing a query of said ratings database to retrieve a policy expense fee calculated based on a likelihood of an entity incurring an administrative expense.

19. The system of claim 15, wherein said quoting module causes the selection of an optional coverage rating formula, the optional coverage rating formula causing the calculation of a premium for the optional coverage as the product of a net rate associated with the quote request and an optional coverage amount.

20. The system of claim 15, wherein said quote request is for a quote for an insurance policy are selected from the group consisting of:

a business insurance policy, a personal lines insurance policy, and a homeowners insurance policy.