Homeowners

1
Homeowners Classification Issues

• Chet Szczepanski
• Chief Actuary
• Pennsylvania Insurance Department

2
Homeowners Classification Issues

• Use of credit scoring
• Use of claims history

3
Homeowners Classification Issues

• Perspectives
• Regulatory
• Actuarial (statistical)
• Actuarial (standards)
• Personal

4
Homeowners Classification Issues

• Use of credit scoring (Regulatory)
• Not well received
• Difficult to understand
• Not causal
• Unfair
• Allowed for underwriting and tiering but not for
  rating

5
Homeowners Classification Issues

• Use of credit scoring (Actuarial Statistical)
• Intellectually appealing
• It works
• Does it double count?

6
Homeowners Classification Issues

• Use of credit scoring (Actuarial Standards)
• Causality?
• Data verifiable reliable?
• Controllability?
• Public acceptability?
• Hazard reduction incentive?

7
Homeowners Classification Issues

• Use of credit scoring (Personal)
• Would you issue this man a Home Depot credit card?

8
Homeowners Classification Issues

• Use of claims history (Regulatory)
• This ones easy, but the devils in the details!
• Apply prospectively from approval effective date
• Disclose to policyholders before implementation
• Assess on PAID losses only

9
Homeowners Classification Issues

• Use of claims history (Actuarial Statistical)
• Been there
• Done that

10
Homeowners Classification Issues

• Use of claims history (Actuarial Standards)
• As good as it gets!

11
Homeowners Classification Issues

• Use of claims history (Personal)
• I needed a new roof, didnt you know?

12
Homeowners Classification Issues

• Conclusions?