WHAT IS PERSONALIZED INSURANCE PRICING (PIP)?
Personalized Insurance Pricing (PIP) is the practice when insurers compute policy premiums by calculating expected future costs across a large, diverse population of risk sources and reductions. For example, car insurance companies would calculate potential future costs across a large, diverse pool of drivers.
Although the pricing mechanism is complicated, the goal of PIP is very simple: price each policy according to its expected costs and proven risk reduction discounts. For example, the best — and most fair — way to price car insurance policies is to use many evidence-based and predictive driving and non-driving rating variables, known as “risk-based factors.”
How do Americans, like you, benefit?
- Fairer, lower, and more accurate rates
- More choices within the insurance market
- More discounts for risk reduction and responsibility
- More protection against negligence, irresponsibility, and bad actors
HOW THE INSURANCE INDUSTRY IS HELPING
Insurers are currently implementing new practices to make it easier to shop for home insurance, car insurance, renter’s insurance, business insurance, and other property and casualty insurance lines. Insurers also are partnering with federal, state, and local policymakers on smart policies like fire safety, traffic safety, and third party financing litigation abuse reduction which save everyone money.
However, the work is not complete, and we need your help contacting representatives and advocating for proven, risk-reducing policies which keep us safer at home, on the road, and in the workplace, based on where actuarial science proves we can all suffer from fewer accidents and losses – consequently reducing everyone’s premiums.
Studies prove that PIP is the most accurate way to predict losses, reduce costs, prevent bad actors from gaming the system, and ensure each policyholder qualifies for every risk reduction discount to which they are entitled.
Actuarial (statistical) science proves PIP gives consumers and small businesses the fairest rates.
Insurers want to work together with consumers and small businesses in offering these risk-reducing discounts because everyone saves money through cooperation in reducing total losses. Competing for business through innovation in reducing total losses and incentivizing responsibility is a win-win proposition for policyholders and insurers.
As a highly regulated industry, insurers must remain faithful to evidence in the data.
HOW IS THIS REGULATED?
As a highly regulated industry, insurers follow strict rate-setting laws and regulations, which require rates to be reviewed for fairness while not excessive, discriminatory, or based on any legally-protected characteristic, such as race, religion, sexual orientation, or gender identity.
The claim loss data held by insurers has immense value in identifying the most impactful and cost-effective methods of reducing the losses spread among all policyholders. For decades, this data has also helped guide national standards in consumer protection and manufacturing, impacting everything from the safety engineering in the National Electric Code to improving the structural design of vehicles meant to better protect their occupants during an accident.
America’s insurers are proud of our contribution to the science of safety.
Analyzing this data and applying the lessons it contains allows insurers to offer a broader range of products at more affordable price points with more qualifying risk reduction discounts.