Farm Bureau Actuaries Conference Personal Auto Symbol Rating

1. Farm Bureau Actuaries ConferencePersonal Auto Symbol Rating Yesterday, Today and Tomorrow

2. Yesterday Based upon MSRP. Applied only to 1st party property coverages. Same Symbol for both Comprehensive and Collision. Combined with “Age” as opposed to “Model Year” Rating.

3. Yesterday Late 70’s 2 significant changes Introduction of Model Year Rating Introduction of Damageability/Repairability into Symbol

4. Age vs. Model year

5. Model Year Rating Eliminated yearly fluctuations between rates. Created significant premium trend. as new cars rated higher and older cars did not decrease – given high inflation this relieved pressure on regulators re approving large rate increases Created a mechanism by which individual vehicle model years could be recognized – never really utilized.

6. Damageability/Repairability Rating Companies began to introduce the actual vehicles experience into symbol rating for Comp and Collision. Use of Industry Statistics together with HLDI analyses to measure differences between vehicles. ISO program “up and down symboled” vehicles up to 3 symbol change.

7. Today Separate Comp vs. Collision rating. Added Liability and 1st party Medical Rating.

8. Problems with Current System Many companies (incl. ISO) don’t differentiate between Comp and Collision. Liability Symbols are just beginning to be implemented.

9. Problems with Current System (cont.) The ability to use Model Year effectively together with specific models has not been realized. E.G. If the 1995 Saturn SL has the highest theft rate as recently published – shouldn’t it have a higher rate than the later models? Companies do not use multi-variate techniques to eliminate interdependencies in their rating/tiering plans (2 dr. vs. 4 dr.).

10. Problems with Current System (cont.) New Vehicles are usually rated by “comparison to similar” existing vehicle – becoming greater problem as new vehicle type are being introduced.

11. New ISO Liability Rating 2-way GLM analysis using combination of curb weight and chassis type (although manufacturer had highest r2). For liability – curb weight indications are different depending on chassis type – somewhat counterintuitive. Frame – predicted relativity increases as weight increases. UniBody - predicted relativity decreases as weight increases.

12. New ISO Liability Rating First Party Coverages - predicted relativity always decreases as weight increases. Since data used was 1997 – 2001 vehicles, minimal data for Unibody > 5,250 lb. Thus curbweight capped at 5,250 lb.

13. New ISO Liability Rating New Vehicles Only Model Years 1996 – 2001 evaluated. Will review LPMP every 2 years. Will not change LPMP on annual basis e.g. October 1. LPMP symbol manual pages are not Model Year specific and do not include vehicle Model Year references except 2001 as earliest and certain new model types.

14. New ISO Liability Rating New Vehicle Types Relativities for new vehicle series will be determined by giving 50% weight to the predicted loss ratio relativity (based on chassis type and curb weight) and 50% weight to 1.00. (Note: Curb weights for Unibody vehicles will be capped at 5,250 pounds).

15. New ISO Liability Rating New Vehicle Types (con’t) For 2002-2004 new vehicles - like vehicle series adjustments have not been applied. Nor will such adjustments be applied on a prospective basis for new vehicles in the LPMP Vehicle Rating Plan. That is, adjustments to ensure consistent treatment of like vehicles will not be made for any vehicles until historical insurance experience for such vehicles is available for analysis.

16. Liability Symbols Is this really so new?

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19. 1/28/2012 19 Vehicle Rating CAS Spring Meeting MAY 18, 2004 Dan Charbonneau Allstate Insurance Company

20. Allstate Insurance Company

21. Allstate Insurance Company

22. Allstate Insurance Company

23. Allstate Insurance Company

24. Allstate Insurance Company

25. Allstate Insurance Company

26. Tomorrow Greater use of true multi-variate analyses by actuaries will greatly improve predictability of symbol rating. Computer simulation of crashes will vastly improve accuracy of initial symbol assignment.

28. WHO WE ARE Crashport A Tec-Masters, Inc. venture. Most advanced, biomechanical, auto accident injury analysis platform. Built on automotive-industry virtual prototyping platform. Database of over 10,000 vehicles with key physical properties. ISO 9001 certified. Leading biomechanics experts (Allan Tencer, PhD; Alan Nahum, MD, FACS). Tec-Masters, Inc. Tec-Masters (parent company) employs 300 engineers and scientists Automotive division specializes in mathematical modeling of vehicle crash and vehicle crash sensing systems. Substantial expertise in dealing with complex data analysis, including expert systems, neural networks, simulation and validation of complex weapons systems, national defense systems.

29. SIMULATION SAMPLES

30. THE POWER OF SIMULATION

31. EXAMPLE: INJURY EFFECT OF BUMPER DESIGN Affect on Whiplash Injury

32. CRASH ANALYSIS PLATFORM

33. COMPARISONS TO TEST DATA

35. VALUABLE CAPABILITY FOR VEHICLE RATING? Current Challenges Assignment of symbols to new vehicles is crude, often very wrong. Vehicle characteristics used for rating plans are crude and to not correlate well to occupant protection, aggressivity, vehicle handling and damageability. Benefits of Crashport Intelligence Accurate symbols for new vehicle designs Symbol assignment based on key design characteristics that affect crash performance, not guesswork. Symbols for key coverages, including BI, 1st party medical and damageability (and possibly repairability). More precise vehicle rating plan Year, Make and Model rated based on the vehicle design characteristics that affect crash performance. Separation of insured characteristics from vehicle characteristics for more precise assessment of risk.

36. Tomorrow Greater use of true multi-variate analyses by actuaries will greatly improve predictability of symbol rating. Computer simulation of crashes will vastly improve accuracy of initial symbol assignment.