NEW DIMENSIONS IN PERSONAL LINES

Rough Notes, Jan 2004 by Boone, Elisabeth

The Hartford Dimensions plan tracks insureds through their driving lifetime

What are two of the dirtiest words in today's insurance vocabulary? Try these: personal auto. Obtaining appropriate, affordable coverage for your clients is often a challenge akin to climbing Mt. Everest in sneakers-and even if you are able to arrange good coverage, it can change in a second when your client's son gets his license or she trades that plodding '94 Buick Century for a gleaming 2004 BMW Z4.

As every agent knows, a myriad of factors go into the complex rating formulas insurers use to price personal auto coverage. In addition to the driver's age and the make and model of the vehicle, add location of residence, miles driven annually, pleasure vs. business use, garage vs. street parking, claim history, and those "gotcha" speeding tickets issued by state troopers in unmarked cars. The laws of 50 different states only exacerbate the frustration. Although it's not true, sometimes it seems as if there's a conspiracy to make personal auto insurance complicated and out of reach for all but that perfect (and nonexistent) driver with no accidents, no tickets, no kids, no sporty vehicles, and no trips more adventurous than a run to the post office.

Maybe there's no way to make personal auto insurance less complex ... but what if there were a way to make it more accessible and more reflective of each individual driver's risk factors? That was the question being examined by the team at The Hartford's personal lines division, and the answer they came up with was The Hartford Dimensions(TM) Auto Plan, which applies interactive rating factors to individual drivers to produce a pinpoint rate for each driver.

Two examples of interactions between rating factors are (1) age and credit and (2) age and driving activity. While Insurance Score is a key indicator of performance, a low credit score will affect youthful drivers differently than older drivers. Because the Dimensions plan uses more than 10 times the typical number of Insurance Scores, "Score" is no longer a singular issue, and business need not be declined solely on the basis of Insurance Score.

Under the plan, spouses don't pay higher rates based on their partners' accidents. Further, because the plan eliminates broad age classes, any rate changes are applied gradually. A driver who turns 65 won't automatically see a large premium increase, and 17-year-old drivers typically will pay lower rates than 16-year-olds. The Hartford Dimensions offers a full range of standard auto coverages, and nonstandard coverage is available through an affiliate, so insureds can move from one product to another as their driving history changes.

The number of underwriting guidelines has been reduced by half, and policy discounts and credits are built into the plan. Depending on the individual situation, the value of traditional discounts such as multi-car and auto/home account credits may be enhanced. The factors that contribute to lower rates remain the same; what's different is how these variables are weighed to develop the best rate for each individual customer. Factors that continue to benefit customers include:

* Companion homeowners policy

* Pleasure and farm use

* Higher deductibles

* Low miles driven

* Vehicle age (liability coverage)

* Prior standard carrier

* Full coverage/high limits

* Good student status

Bold new vision

The Hartford is ranked #12 nationally in personal lines premium volume, and some 4,000 independent agents across the country currently represent the insurer for personal lines, according to Jonathan Bennett, senior vice president of the personal lines division. The Hartford Dimensions, he says, arose from a bold new vision for personal auto designed to make agents' jobs easier by building underwriting complexities into the product.

"The thought process for The Hartford Dimensions began about two years ago, and we introduced the product in April of 2003, rolling it out in Illinois, Arizona, and Alabama," Bennett says. At year end 2003 the program is available in almost 35 states and the District of Columbia. Asked how the program has been received, he replies, "It's been a huge success. We couldn't be more excited about the reception from our agents, who have responded with a tremendous amount of support for the new product as well as our automation initiative. The two go very much hand in glove, and we're positioning ourselves to become #1 with our agency partners."

What does Bennett see as the outstanding features of The Hartford Dimensions? "The most exciting thing for us is the breadth of the product in terms of the size of the marketplace to which we can offer the product," he replies. "We think that's tremendous because it allows our agents to represent us much more broadly across the flow of business they typically see in their offices. The other key feature is the automation that supports The Hartford Dimensions program. The Quote-to-issue system, or QTI, is a process that allows agents to quote in their office in about 10 or 12 minutes and get a policy with a firm price that is a good fit for the insured." QTI integrates underwriting guidelines, CLUR, MVR, and Insurance Score, so agents need not use their point-of-sale system. Agents also can significantly reduce duplication by using an electronic bridge to transfer customer data to QTI from comparative raters and agency management systems.