The AAIS Homeowners By-Peril Rating Plan is a simple, flexible, but detailed program for pricing each homeowners account to reflect its unique risk exposure. It’s a smart plan designed to be easy to implement and customize for each carrier’s underwriting strategy and risk appetite.
By-Peril Rating on the AAIS Underwriting Platform
The AAIS Homeowners By-Peril Rating Plan wll be easier to adopt and implement as it becomes available through the AAIS Underwriting Platform, a cloud-based application for underwriting and rating policies based on AAIS programs.
“UP” is scalable and affordable for all organizations, and features “plug and play” capabilities that greatly reduce the time and cost of IT work to adopt, implement, and maintain an AAIS-based program.
With the UP, carriers using the by-peril plan gain speed-to-market by simply accepting, postponing, or rejecting program updates that are centrally maintained and validated by AAIS.
When rating policies, UP automatically identifies mandatory endorsements and incorporates states-specific manual provisions, ensuring that your homeowners policies are current and compliant. There is little or no need for coding or testing work by the company.
Insurers can use the by-peril plan on the UP in one of two ways:
- As a front-end application and quoting system for agents and underwriters; or
- As a rules and rating engine integrated with an existing policy administration system.
Either way, access to the by-peril plan through UP can be extended to third party users, including agencies and MGAs.
From an IT perspective, UP utilizes service-oriented architecture with mobile-ready HTML5 interfaces. Its web service integration allows agents and underwriters to use it without having to leave their own policy administration systems.
Detailed policy data collected during the underwriting and rating process is downloaded for import or transmitted to and from your internal system.
Go to the AAIS YouTube channel to see our November 2015 web seminars describing the HOBP and how the AAIS Underwriting Platform is being extended to support the plan.
The “HOBP” stands out for the clarity of its underlying structure and the ease of access it provides to rating information, including the base loss costs and various rating factors. This transparent approach allows users to analyze individual rating components and their impact on a company’s book of business.
The HOBP is a comprehensive, self-standing plan not tied to any underlying composite plan and can be used with AAIS or other policy forms. Users can unbundle components of the plan for refinement of an existing rating plan, which allows for phased-in implementation.
Users can also add, delete, or customize components of the plan.
The HOBP is provided as a rating manual with multistate rules and state-specific pages that includes base loss costs and territorial assignments for 10 different perils.
- Liability & Medical Payments
- All Other (inc. theft, water, etc.)
- Fire Following Earthquake
- Hurricane Wind
- Winter Storm/Wind
- Winter Storm/Non-Wind
Perils can differ by state, and the rating information is structured to add additional perils easily.
The 2015 update of the HOBP includes updated loss costs based on $20 billion in premium and loss data over the five most recently available calendar years. The loss costs are updated for owners and non-owners forms, and incorporate modelled catastrophe data derived from CoreLogic/EQECAT’s RQE and RMS’s RiskLink.
Base loss costs are displayed for each zone (mostly defined by county), and the zone loss costs are further refined at the ZIP Code level by peril-specific sub-zone rating factors.
The HOBP rating information includes tables with a full complement of factors to adjust base loss costs for each rating variable and coverage option.
These include factors for amount of insurance, fire protection, construction, amount of deductible, and many others, including some relatively new ones, such as the presence of dogs, trampolines, or swimming pools (for liability coverage).
Adoption and Transition Support
AAIS has experienced staff specialists available to help your company incorporate the HOBP and UP into your existing operations and automation.
AAIS customer integration specialists can advise you on integrating the Underwriting Platform with your current policy processing systems, whether as an upfront data collection module, a “mid-stream” rating engine, or in some other configuration.
Similarly, AAIS actuaries can advise you on customizing the plan and managing or minimizing any premium changes that result from using it.
To get started, contact us about using a tool developed by AAIS actuarial and product development staff that allows you to see the impact and benefits of by-peril rating for a model risk in 20 ZIP Codes of your choosing.
At no charge, you can submit a risk profile (amount of insurance, construction, protection class, etc.) along with your loss cost multiplier(s) and 20 ZIP Codes that are representative of the territories in which you write homeowners policies.
You’ll see for yourself how premiums derived from the AAIS Homeowners By-Peril Rating Plan compare and contrast with those developed by your current rating plan. The AAIS plan will produce more price points and assign premium with greater precision to reflect each risk’s exposure to insured perils in its territory.
If your company adopts the plan, AAIS support will be available on a consulting basis to modify it to meet your needs and integrate with your systems.
The HOBP refines the application of established variables—such as claim history, age of systems, and others—by assigning them to the appropriate peril.
To indicate how many price points the plan can generate, there are, among other things, eight construction classifications, seven external cladding classifications, and eight roof covering classifications, each with rating factors assigned to the relevant perils.
The plan also features several deductible options.
- Percentage deductibles ranging from 0.1% to 25% are provided for wind and hail losses, reflecting the vast range in exposure between coastal and inland areas.
- Flat dollar deductible options are provided for non-wind losses, ranging from $100 to $25,000 per occurrence; the corresponding rating factor.
Also, the HOBP allows users to vary their loss cost multipliers by peril, providing an option for addressing losses with different expense loads for reinsurance or other factors.
Beyond its value for rating policies, the AAIS Homeowners By-Peril Rating Plan can serve as a tool to analyze rate adequacy, and establish underwriting guidelines, marketing objectives, and reinsurance needs with precision.
Using the information provided by the HOBP, carriers can adjust their marketing strategies to improve their spread of risk, and implement loss control measures or use of certain endorsements (e.g., theft coverage limitations) to improve their loss ratios.
Using the HOBP, a carrier can segment its book of business by location, peril, rating variables, and other factors to identify optimum and subpar risks, and their characteristics.
Insurance companies seeking more information on AAIS products and services can contact Rick Maka, director of marketing and strategic alliances, by email or by calling 800-564-AAIS, ext. 3222.