Chicago - Aon Re Inc. has studied the results of companies that have implemented more sophisticated customer segmentation strategies over the past few years. The results of the study show that while the overall returns for the personal lines property industry still lag the cost of capital, "we are starting to see differentiating results between insurers," says Randall Brubaker, Aon Re Services senior vice president. "This differentiation has been somewhat masked by the increased frequency of hurricanes during the past two years but the underlying progress is evident."According to Brubaker, "It is clear that the core disciplines and customer segmentation tactics that are commonly utilized with personal lines automobile have improved the financial results of the non-catastrophe personal lines property business. The next phase of improvements in personal lines property will include substantial improvements to the disciplines and tactics associated with customer level segmentation on catastrophe risk. The current more active hurricane period has only accelerated the need to implement more sophisticated catastrophe-based customer level segmentation strategies."
The ability to pair the Aon Catastrophe Scores at the policy and location level with insurance, credit and other core multivariates will enable insurers to improve the quality of pricing for all of the risks insured within the policy, according to Aon Re.
The Aon Catastrophe Scores also enable insurers to implement pricing and underwriting strategies that immediately reflect the significant learnings from the past two hurricane seasons, views on increased frequency levels and higher levels of capital consumed by property insurance writings. All catastrophe perils including hurricane, earthquake, fire following earthquake, tornado hail, winter storm, brushfire, flood and terrorism and other localized perils can be incorporated into Aon Cat Scores.
"The need to incorporate more sophisticated catastrophe underwriting and pricing approaches into customer segmentation models is clear," says Michael Bungert, Aon Re CEO. We are pleased that our continued investment in catastrophe modeling and our continuing significant investment in our own technical client service capabilities will make the transition into the next phase of underwriting and pricing sophistication easier for our clients and prospects."
Source: Aon Corp.
