Property rating and segmentation have long been based on the geographical and environmental factors surrounding a property, the characteristics that comprise the property, and who lives in the property. These data points are pooled to develop an appropriate tier and price for insuring the property. At the same time, insurance carriers have primarily relied on credit-based insurance scoring and property loss history to determine an individual’s propensity for risk as a homeowner. As the data available to carriers has improved, risk segmentation has improved as well, but it has almost always been within the same general framework. But that is changing. Insurance carriers in many states are seeing the value of using auto data to inform their home risk assessments.

Enhance (or Boost?) home risk segmentation using auto data

So how does using auto data to supplement what carriers know about a homeowner and the risk they present determine risk propensity? The reasoning is simple. The results of a 2019 LexisNexis® internal study of more than 4.7 million exposures in a variety of regions spanning 2010 to 2018 show that customers with auto claims also incur more home claims. Not only that, an auto customer with lapses, low limits and carrier cancellations is also riskier on the home side.[1]

This is a breakthrough insight that can help you improve your business. By using this data in your rating process, you can better segment your customers, then discount homeowners who don’t have prior accident history and surcharge those who do.

But there’s more. The 2019 study also shows that one in five home shoppers have incurred accident-related auto claims.[2] The results also show that homeowners with one prior accident impact loss ratio about 10% more than those with a clean driving record. Those with multiple accidents impact loss ratio by as much as 30%. Homeowners with the highest auto liability limits impact loss ratios 13% less than those with 50/100 limits and a whopping 38% less than those with state minimum limits.

All of this tells us that responsible insureds are responsible in both auto and home insurance. Carriers who use this information in their homeowners business will see improvements in their rating and segmentation. Those who don’t will risk being adversely selected.

Your new best practice

You can optimize segmentation, expand coverage offerings and improve underwriting by using LexisNexis® C.L.U.E.® Auto and LexisNexis® Current Carrier® Auto in your homeowners workflow. Doing so can help improve both your auto and home insurance business.

[1] 2019 LexisNexis internal study of 4.7 million exposures from 2010-2018.

[1] Id.

[2] Id.