“The homeowners insurance industry is expanding its use of underwriting variables and rating techniques and is more closely evaluating those that are traditionally used in the personal automobile insurance underwriting process,” said Mark McElroy, executive vice president of TransUnion’s insurance business unit. “The findings clearly show that the use of alternative data assets such as court record violations can help property insurance carriers better assess a homeowner’s risk. As insurance carriers incorporate driving records to properly price riskier policies, consumers with clean driving records can benefit.”
The TransUnion study finds the loss ratio for a home owner insurance company is about two times greater with home owners who have severe court violations than those who have none.
The study revealed that 25 percent of policies have at least one criminal or traffic violation against the primary name insured. However, when researchers accounted for the court record data of additional household members, the violation rate surged from 25 percent to 34 percent.
“Incorporating court record violation data into the pricing and underwriting process provides property insurance carriers greater pricing sophistication and profitability,” argues Geoff Hakel, a senior vice president of TransUnion’s insurance business unit.
TransUnion says that taking into account court violations can improve the risk segmentation and more accurately predict price risks and potential home owner loss ratios. Also, the study researchers argue that it will help “right-price” one-third of home owners’ risks that have about a 29 percent higher loss ratio.