RE: Auto liability ratemaking

Derucki, Jeremy J ( (no email) )
Wed, 26 May 1999 17:08:25 -0400

Model type is used as a rating variable for physical damage coverages. The
model type factors are generally related to value or new cost of the
vehicle, which is supposed to be directly related to the cost of repair or
replacement of the vehicle in an accident. It is not a perfect rating
variable, as most variables are not perfect. However, it is easily
accessible and historically used, which is why you see most companies using
it as a rating variable.

As for using it to rate liability coverages, it would seem that there is a
correlation. However, I don't know of a company that does this. I think
that some companies use performance vehicle surcharges, which target sports
cars and high performance vehicles which tend to be driven faster, thus
causing more accidents and liability losses. I believe that this is one
type of car model rating on liability coverages.

> -----Original Message-----
> From: jadams@mail.state.mo.us [SMTP:jadams@mail.state.mo.us]
> Sent: Wednesday, May 26, 1999 3:48 PM
> To: casnet@lists.casact.org
> Subject: Auto liability ratemaking
>
> It is my understanding that most Insurers do not use model type or weight
> as
> a rating parameter for private passenger liability type coverages. I have
> heard that frequency and severity does vary with model type, but have not
> seen data.
>
> Can anyone explain why model type is not used for liability ?
>
> Thank You
>
>
>
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