Using Novel Data for Vehicle Rating
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Using Novel Data for Vehicle Rating THE SCIENCE OF RISKSM 1 Antitrust Notice • The Casualty Actuarial Society is committed to adhering strictly to the letter and spirit of the antitrust laws. Seminars conducted under the auspices of the CAS are designed solely to provide a forum for the expression of various points of view on topics described in the programs or agendas for such meetings. • Under no circumstances shall CAS seminars be used as a means for competing companies or firms to reach any understanding – expressed or implied – that restricts competition or in any way impairs the ability of members to exercise independent business judgment regarding matters affecting competition. • It is the responsibility of all seminar participants to be aware of antitrust regulations, to prevent any written or verbal discussions that appear to violate these laws, and to adhere in every respect to the CAS antitrust compliance policy. THE SCIENCE OF RISKSM 2 Life in the Fast Lane Image Credits:© iStockPhoto.com/Alexey Dudoladov (1) and Stefan Weichelt (2) THE SCIENCE OF RISKSM 3 Vehicle Series • Family of Vehicles • Same Make, Name, Body Type • Similar Construction • Used in Experience Reviews THE SCIENCE OF RISKSM 4 Family Tree DX 15,805 16,605 EX 19,605 20,405 21,955 I/C Sedan GX 25,490 Hybrid LX 17,755 18,555 19,155 23,950 SI 22,405 2011 Honda Civic VP 15, 805 16, 605 DX 15,605 16,405 Coupe EX 19, 605 20, 405 21, 955 LX 17,555 18,355 SI 22,,05205 THE SCIENCE OF RISKSM 5 What’s in a Name? • Trim Packages • Internal Branding • Platforms and Parts • Manufacturer / Nameplate • Design Changes THE SCIENCE OF RISKSM 6 Attributes Diiliimensionality Bellsandhild Whistles Under thdhe Hood Body Styling Original Cost New Engine Cylinders Length / Width Anti-Lock Brakes Engine Size Bumper Height Daytime Lamps Engine Type Wheelbase Stability Control Horsepower Weight Drive Wheels Torque Which of these help predict loss propensity? THE SCIENCE OF RISKSM 7 Wanted: Vehicle Data (Start here.) Car Years Insurance Pricing Vehicle Databases Databases Vehicle Policy Selections Public Exposures Safety Ratings Frequency Safety Systems Claims Experience Vehicle Manufacturer Severity Dimensionality Covariates Proprietary Location Metrics Classification Other THE SCIENCE OF RISKSM 8 Requirements • Predictive Power • Accuracy • Completeness • Continuity • Rights of Use • Novelty THE SCIENCE OF RISKSM 9 Matching Hierarchy Most Granular Vehicle Identification # Claims Experience Trim Package VIN Decoders Manufacturer Specs Key Features Proprietary Metrics Model Safety Ratings Manufacturer Production Counts Model Year Consumer Tools Country Econometrics Least Granular THE SCIENCE OF RISKSM 10 Civic Unrest JHMFG2A5*B Data Source Vehicle Identifier Additional Info VIN Decoder 2011 HOND CIVIC SI COUPE2DR, 4 CYL JD Power & Assoc. 2011 Honda Civic CoupeSi I4 Engine IIHS Ratings 2006-2011 Honda Civic 2-door “… Except SI”* IIHS Losses 2008-201x Honda Civic Si Two-Door Model MSN Auto 2011 Honda Civic Si Coupe Front-Wheel Drive NHTSA Ratings 2011 Honda Civic 2 DR FWD Not Rated NHTSA Production 2011 HONDA CIVIC** Car * - excerpted: SI does not have AHR (All Seat Head Restraints) ** - inference: 2009 latest model year posted to web site as of 4/2012 THE SCIENCE OF RISKSM 11 Devil in the Details • Exploratory Data Analysis • Disambiguation • Str ing M a tc hing • Conflicts and Tiebreakers • Automation and Replication • Quality Control and Updates THE SCIENCE OF RISKSM 12 Model Development • Attribute Selection • Controls and Covariates • Correlations and Interactions • Form and Structure • Sub-model Approach THE SCIENCE OF RISKSM 13 Perils of Aggregation 70.0%70.0% 60.0%60.0% 5050.. 0%0% 40.0%40.0% 30.0%30.0% 20.0%20.0% 10.0%10.0% 0.0%0.0% 00 500 500 1,000 1,000 1,500 1,500 2,000 2,000 2,500 2,500 3,000 3,000 3,500 3,500 4,000 4,000 4,500 4,500 5,000 5,000 Animal GlassAnimal TheftTheftAll AnimalCombinedWeatherWeather OtherOther All Combined THE SCIENCE OF RISKSM 14 Validation ExperienceExperienceExperienceExperience Ratio Ratio Ratio Ratio Percentiles PercentilesPercentiles Percentiles -- ---- -- Predicted Predicted Predicted Predicted vs. vs.vs. vs. Observed ObservedObserved Observed 275222522.252252..75.2525 2.25 1.751.75 1.75 1.251.25 1.25 0.750.75 0.75 0.250.250.25 0.250.40.250.20 0.5 0.50.60 0.90.75 0.751.00 1 1 1.41.401.25 1.25 1.91.5 1.51.80 1.75 1.752.20 2.4 2 2 AttributeChiC-BasedompreCombinedCollisionhensReferenceive ReferenceReference LineRfRef erence LineSeries Line Li-neBased THE SCIENCE OF RISKSM 15 Segmentation Range of Attribute-Based Predictions Within Single Series-Based “Symbol” Collision Coverage THE SCIENCE OF RISKSM 16 Performance Matters 2011 Honda Civic Trim Package EX SI OCN $21,955 $22,250 Body Styling 2 Door Coupe 2 Door Coupe Seat Fabric Leather Carpet Horsepower 140 197 Predicted Outcomes Series-Based Collision same Comprehensive same Attribute-Based Collision 8% higher Comprehensive 15% hhhigher THE SCIENCE OF RISKSM 17 Safety Feature 2011 Honda CR-VSEV SE OCN $22,395 $23,645 Drive Train Front-Wheel Four-Wheel Predicted Outcomes Series-Based Collision 7% higher Comprehensive 13% higher Attribute-Based Collision 3% higher Comprehensive same THE SCIENCE OF RISKSM 18 Design Change Jeep Grand Cherokee Unlimited Model Year 2010 2011 OCN $41,820 $40,315 GVWR 6,150 lbs. 6,800 lbs. Wheelbase 109.5” 114.8” Daytime Lights No Yes Predicted Outcomes Series-Based Collision 1% lower Comprehensive 2% lower Attribute-Based Animal Collision 16%12% lower FallingComprehensiveObjects etc. 14%same higher THE SCIENCE OF RISKSM 19 State of the Art • Brake Assist • Stop-Start • Parking Proximity • Driver Alert • Lane Departure • Blind Spot • Active Cruise Control • Weight Reduction Source: Automobile Association of America (AAA), “AAA Announces New Vehicle Technology Trends for 2012,” March 1, 2012. http://newsroom.aaa.com/2012/03/aaa-announces-new-vehicle-technology-trends-for-2012/ THE SCIENCE OF RISKSM 20 Define Novelty THE SCIENCE OF RISKSM 21 Visit us online at www.verisk.com THE SCIENCE OF RISKSM 22.