When predicting claims risk and calculating adequate pricing for motor insurance, actuaries generally focus on the vehicle, usage, past claims and the driver. To differentiate the risk associated with drivers, historical policy data, claims data and public records data sets (to name a few) are typically used. Using all this information in a pricing model provides more granularity, a greater understanding of the risk, and therefore better premium estimations.
However, this data tends to be for the policyholder only. When it comes to differentiating risk associated with named drivers, insurers have mainly relied on one thing, their age.
Considering that around half of motor insurance policies have at least one additional driver, who in theory could be driving the vehicle at least 50% of the time, a finer differentiation of risk associated specifically with named drivers should be hugely beneficial.
To determine if additional information about named drivers would truly help with differentiating the risk of a motor insurance policy, LexisNexis Risk Solutions analysed policies with named drivers present.
This blog highlights some of the risk predictors for named driver insurance.