US Insurer Automates Complex Determinations of Vehicles’ Territorial ratings to Meet Regulation Compliance

Automation enables agents and brokers to price policies much more quickly than they could if they had to determine a vehicle’s rating territory on the fly, meeting regulation compliance.

A large U.S. company provides property and casualty insurance and group benefits to customers around the world. One place where policy pricing is challenging is the Connecticut auto insurance market. That state’s Insurance Department Regulation 38a-686-2 places stringent restrictions on how insurers assign vehicles to the geographic territories they use in calculating ratings. The insurer enlisted assistance from Precisely to ensure regulation compliance without dedicating exorbitant amounts of staff time to geospatial analysis.

Now, the insurer’s systems incorporate a quarterly data feed from Address Fabric, a file of all U.S. addresses and address-related characteristics. Because the geocoded location data integrates automatically into the insurer’s internal pricing solution, it streamlines compliance. It also creates a convenient audit trail should the Connecticut Insurance Department ever need to see documentation in support of the company’s pricing decisions.

Auto insurance companies predict the risk of a particular policy based, in part, on where the vehicle is garaged. In many cases, U.S. insurers can use zip codes to determine these territorial ratings. However, the Connecticut Insurance Department prohibits this simplistic approach in pricing policies for non-fleet private passenger vehicles. The state specifies that towns cannot be divided into multiple territories, by zip code or any other designation. Moreover, the regulation requires that when two towns are separated by a roadway, “an insurer … shall rate the particular risk using the lower rate of the two territories.” The Insurance Department may ask an insurer at any time to explain why it has assigned an address to a particular territory.

For this large insurance and financial services provider, compliance with the regulation’s very detailed rules around territorial definitions required development of a deep understanding of addresses throughout the state. Manually determining each vehicle’s territorial ratings with the right degree of specificity would consume a great deal of staff time. The company needed a process that could automate the complex geospatial analysis that the regulation requires, while incorporating high-quality data that business leaders could have confidence in.