Verisk Launches First-of-its-Kind Insurance Index to Better Inform Pricing Decisions

Rhea-AI Summary

Verisk has launched the ISO Experience Index, an innovative tool aimed at modernizing risk pattern analysis for actuaries in the insurance industry. The insurance sector faced unprecedented loss ratios in 2023, with $21.2 billion in underwriting losses. The new index helps insurers assess risk patterns, make informed pricing decisions, and adapt to changing market conditions. It offers quarterly updates, streamlined data adjustments, and consistent methodology across states. Initial metrics focus on Homeowners, with expansion to other lines of business expected. The index revealed a 2.5% rise in Q4 2023, a 3.4% increase from the end of 2022, and a 24.4% rise since 2021.

Positive

• Launch of ISO Experience Index to modernize risk analysis.
• Provides quarterly updates and streamlined data adjustments.
• 17.2% increase in pure premiums for Q4 2023 over the preceding five-year period.
• Index shows a 2.5% rise in Q4 2023, reversing the third-quarter decline.
• Index remains 24.4% higher than the end of 2021.

Negative

• $21.2 billion in underwriting losses reported in 2023.
• Insurance industry exceeded loss ratio levels not seen in nearly 20 years.

Insights

Financial Analyst

The release of the ISO Experience Index by Verisk is noteworthy for the insurance industry, especially in the context of significant recent underwriting losses amounting to $21.2 billion in 2023. This index offers actuarial insights that can be pivotal in addressing the volatility and increased scale of loss patterns. By providing quarterly updates and maintaining a consistent methodology across states, it enables insurers to have a more granular understanding of risk, which is a departure from traditional annual loss cost reviews. This increased frequency in data updates allows insurers to make more responsive pricing decisions, potentially improving profitability in the long term.

From a financial perspective, this tool could help insurers optimize resource allocation and pricing strategies, ultimately enhancing their financial stability. However, the tool's effectiveness will depend on how accurately it captures and predicts risk patterns. The initial focusing on Homeowners insurance, with plans to expand to other key lines, suggests a phased but strategic rollout. Investors should watch how well this tool is adopted and its practical impact on underwriting performance.

Market Research Analyst

The introduction of the ISO Experience Index could significantly influence market dynamics within the insurance sector. The ability to swiftly assess and react to risk patterns provides a competitive edge to insurers subscribing to Verisk's services. The quarterly release schedule and the rolling five-year data view are particularly beneficial for identifying and responding to emerging trends, such as the impact of severe convective storms on property insurance. This innovative approach promises to reduce the lag between data observation and actionable intelligence, which traditionally hampers effective risk management.

Importantly, the tool's utility in offering current information and contextually relevant insights could foster a more proactive market response, potentially leading to more stable and predictable insurance premiums. For investors, this suggests that insurers leveraging the ISO Experience Index might experience less volatility in their financial performance, making these companies potentially more attractive investment opportunities.

Insurance Tech Expert

Verisk's ISO Experience Index represents a technological advancement in the field of insurance analytics. The integration of real-time data updates and consistent methodology across regions address key challenges faced by insurers, particularly in swiftly adapting to market conditions and fluctuating loss levels. By streamlining data adjustments and providing frequent updates, this tool enhances decision-making processes and supports more precise risk assessments.

From a technological standpoint, the success of this index will depend on its accuracy and the ease with which it integrates with existing systems. Its rollout on Verisk's established product delivery platforms suggests robust support and ease of adoption. However, the true test will be in its practical application and the tangible benefits it brings to insurers in terms of improved loss ratios and profitability.

Verisk’s ISO Experience Index can help the insurance industry quickly assess changes in risk patterns and the cost of insuring risk

JERSEY CITY, N.J., July 09, 2024 (GLOBE NEWSWIRE) -- The insurance industry exceeded loss ratio levels that have not been seen in nearly 20 years, with an estimated $21.2 billion reported in underwriting losses in 2023. To help insurers, Verisk (Nasdaq: VRSK), a leading global data analytics and technology provider, has launched its ISO Experience Index, an innovative tool designed to modernize how actuaries in the insurance industry analyze risk patterns. The ISO Experience Index addresses the increasing volatility and scale of loss patterns in the industry, offering a responsive and up-to-date indicator of observed underwriting experience.

"Insurance plays a pivotal role in society and the industry has faced harsh market conditions over the last few years. Our new Experience Index is one more way we empower our clients to react quickly and effectively to changing market conditions, ultimately saving them time, effort and resources while driving profitability," said Saurabh Khemka, co-president of underwriting solutions at Verisk. "Insurers can now assess risk patterns and formulate responsive strategies with increased confidence."

As a benchmarking tool for insurers, ISO Experience Index provides users with frequent and responsive insights to help accelerate pricing decisions and bolster confidence in the evaluation of market conditions.

Verisk’s new index:

• Offers quarterly releases and streamlined data adjustments, with more frequent updates compared to traditional loss cost reviews.
• Is directly tied to specific points in time and maintains consistent methodology across different states, to support uniformity in measurement.
• Provides carriers with current information and contextual insights beyond the annual review cycles.
  
  

Revolutionizing risk management through responsive insights, in real time

Recent trends seen in the ISO Experience Index for Homeowners underscore the importance of this tool, demonstrating the fluctuation of loss levels throughout different markets. The countrywide Experience Index rose 2.5% in the fourth quarter of 2023 compared to the previous quarter, reversing course from the decline observed in the third quarter. The index remains 3.4% higher than the mark at the end of 2022, and 24.4% above the level at the end of 2021.

Khemka added, "This index provides insurers with timely indicators to prioritize in-depth analysis, resource allocation, and pricing activities. It also offers a comprehensive view of changing conditions in various geographic markets, enabling carriers to make informed decisions."

Beyond its responsiveness to the latest data trends, the tool also helps illuminate longer-term patterns with its multi-year view. By using the rolling five-year basis of data, the index reveals a 17.2% increase in pure premiums for the fourth quarter of 2023, compared to the preceding five-year period. This provides numerical context to issues such as severe convective storms that have become increasingly relevant to property insurers and present a new operating environment.

The ISO Experience Index is available today on existing product delivery platforms for eligible subscribers of Verisk's Core Lines Services. The initial launch is poised to introduce loss level metrics by state for Homeowners, with expansion expected soon to follow for other key lines of business.

About Verisk 
Verisk (Nasdaq: VRSK) is a leading strategic data analytics and technology partner to the global insurance industry. It empowers clients to strengthen operating efficiency, improve underwriting and claims outcomes, combat fraud and make informed decisions about global risks, including climate change, extreme events, sustainability and political issues. Through advanced data analytics, software, scientific research and deep industry knowledge, Verisk helps build global resilience for individuals, communities and businesses. With teams across more than 20 countries, Verisk consistently earns certification by Great Place to Work and fosters an inclusive culture where all team members feel they belong. For more, visit Verisk.com and the Verisk Newsroom. 

FAQ

What is the ISO Experience Index launched by Verisk (VRSK)?

The ISO Experience Index is an innovative tool designed by Verisk to modernize risk pattern analysis for actuaries in the insurance industry, providing frequent and responsive insights for better pricing decisions.

How does the ISO Experience Index impact insurance pricing decisions?

The ISO Experience Index provides insurers with timely and frequent data updates, helping them assess risk patterns and make more informed pricing decisions, ultimately improving profitability.

What were the underwriting losses reported by the insurance industry in 2023?

The insurance industry reported $21.2 billion in underwriting losses in 2023, marking the highest loss ratio levels in nearly 20 years.

How has the ISO Experience Index performed in recent quarters?

The ISO Experience Index showed a 2.5% rise in Q4 2023, reversing the decline from Q3, and is 3.4% higher than the end of 2022. It remains 24.4% higher than the end of 2021.

What long-term trends does the ISO Experience Index reveal?

Using a rolling five-year data basis, the ISO Experience Index reveals a 17.2% increase in pure premiums for Q4 2023 compared to the preceding five-year period, highlighting trends such as the impact of severe convective storms on property insurers.