Private Passenger Automobile Insurance Coverages
An Actuarial Study
of the Frequency and Cost of Claims
for the State of Michigan
by
EPIC Consulting, LLC
Principal Authors:
Michael J. Miller, FCAS, MAAA
Richard A. Smith, FCAS, MAAA
Peer Reviewer:
Klayton N. Southwood, FCAS, MAAA
July 2004
Foreword
EPIC Consulting, LLC was retained to study the frequency and cost of claims data in Michigan for the
private passenger automobile insurance coverages. The primary purpose of the study was to determine
the degree of variation in losses by geographical area and, to the extent possible, determine whether
the losses were primarily impacted by the frequency of accidents or the cost of the damage.
The study and this report were sponsored by the Insurance Institute of Michigan and the Michigan
Insurance Coalition.
EPIC had the sole responsibility and the independence to prepare this report and to conduct the study
in the way it considered to be actuarially sound. The opinions and conclusions expressed in this report
are those of the individuals on EPIC’s research team.
In June 2004, EPIC published a an actuarial study of the frequency and cost of homeowners claims for
Michigan. This auto study complements the previous homeowners study.
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©EPIC Consulting, LLC
About EPIC Consulting, LLC
EPIC is a privately-held Illinois limited liability corporation. EPIC provides actuarial services to
insurers, insurance regulators, and self-insured business groups. Many of EPIC’s clients have been
served continuously by its senior consultants for nearly twenty years.
The authors of this report are principals of EPIC, Fellows of the Casualty Actuarial Society and
Members of the American Academy of Actuaries. Each has been actively involved for their entire
career in ratemaking for personal insurance coverages.
The authors are available to answer questions about this report by calling (715) 358-6878, or (309)
828-8351, or by contact through the EPIC website at www.ask-epic.com.
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©EPIC Consulting, LLC
Reliances and Limitations
The authors have relied on the accuracy of the data provided by the ten participating insurers. The
aggregate loss ratios in the study’s database were compared to those published by the National
Association of Insurance Commissioners (NAIC). The loss ratios in the two databases appeared to be
consistent, except for the liability coverage loss ratios for 2001 and 2002. We were unable to
reconcile the liability loss ratios in this study for accident-years 2001 and 2002 with the calendar-year
loss ratios published by the NAIC. However, this study’s accident-year loss data were used for
comparative purposes across geographic areas and across coverages, and for comparative purposes we
judged these data to be reasonable. To the extent there are material, undetected errors in the database
our conclusions could be significantly impacted.
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Table of Contents
Foreword ...........................................................................................................................................i
About EPIC Consulting, LLC ..........................................................................................................ii
Reliances and Limitations .............................................................................................................. iii
Executive Summary .........................................................................................................................1
What the Study Is and Is Not.....................................................................................................1
Conclusions of the Study...........................................................................................................1
Description of the Study and Database ............................................................................................3
Definition of Important Terms and Concepts...................................................................................4
Private Passenger Automobiles .................................................................................................4
Automobile Insurance Coverages..............................................................................................4
Comprehensive – Cause of Loss ...............................................................................................5
Claim Frequency .......................................................................................................................6
Average Cost Per Claim ............................................................................................................6
Pure Premium ............................................................................................................................6
Premiums...................................................................................................................................7
Claim Losses .............................................................................................................................7
Loss Ratio..................................................................................................................................7
Expense Ratio ............................................................................................................................8
Profit ..........................................................................................................................................8
Insurance Rates..........................................................................................................................9
Analysis and Findings ....................................................................................................................10
Industrywide Data ...................................................................................................................10
Study Database – Statewide ....................................................................................................21
Geographical Loss Variation ...................................................................................................27
Catastrophe Losses ..................................................................................................................28
Frequency, Severity and Pure Premium Bands .......................................................................29
Population Density Bands .......................................................................................................38
Territories by Coverage ...........................................................................................................41
Comprehensive Losses by Peril...............................................................................................41
Degree of Competition ............................................................................................................42
Conclusions .............................................................................................................................44
TOC
©EPIC Consulting, LLC
Executive Summary
What the Study Is and Is Not
This is not a study of the adequacy or excessiveness of private passenger automobile insurance rates.
A test of the reasonableness of rates is an insurer-by-insurer determination, because each insurer: has
a unique group of insureds with unique expected losses; has unique methods of operation with unique
operating expenses; and has a unique cost of capital and a unique investment portfolio which translate
into a unique profit margin provision in its rates. The reasonableness of any rate schedule can only be
judged on the losses and expenses which were expected at the time the rates were implemented. The
reasonableness of rates cannot be judged by simply looking back at actual results for two or three
years.
This is a study of the private passenger automobile claim losses that actually occurred in 2000, 2001
and 2002. The goal of the study was to explain, to the extent possible, what the losses were, how often
the claims occurred, where they occurred, and what perils gave rise to the losses.
Conclusions of the Study
The nature (i.e., claim frequencies and claim severities) of the private passenger insurance losses is
significantly different for each of the seven auto coverages analyzed in this study.
The claim losses vary significantly by geographical area within Michigan and these geographical
variations are different for each of the seven coverages. As a general rule, geographical areas of high
claim frequencies for one coverage are not areas of high claim frequencies for all coverages.
Generally, areas of high claim severities for one coverage are not high cost areas for all coverages.
The variation in losses by coverage and by geographical area means the private passenger auto losses
and loss ratios will likely differ from one insurer to the next. Each insurer has a unique group of
policyholders with respect to the location of its policyholders and the optional coverages purchased.
Because of the uniqueness of each insurer’s exposure to loss, judgment as to the reasonableness of
rates can only be made on an insurer-by-insurer basis.
The loss ratios in the study’s database show little variation across the ten population density bands for
the liability coverages and the physical damage coverages. The consistency in the loss ratios suggests
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that the variation in the premiums charged across the population density bands have been
approximately in proportion to the variation of losses incurred.
Michigan’s private passenger auto loss ratio reached a high of 98.3% in 2001, ending a sustained
increase since 1993. Michigan’s sustained increase in the total auto loss ratio was the result of an
increase in the loss ratios for the liability coverages, not the physical damage coverages. The increase
in Michigan’s liability loss ratios was the result of rising claim costs, rather than an increase in the
frequency of claim occurrences.
Underwriting profit/loss ratios in Michigan ranged from -13.1% to -35.0% during the period 1998
through 2002. Even when all investment income is considered, insurers realized only a 1.0% total
return during 1998 through 2002 in Michigan. Such a return is less than an insurer could have realized
had it invested its capital in a less risky business than Michigan auto insurance.
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Description of the Study and Database
Data for the study were provided by the following insurers:
Allstate Insurance Company
AMCO Insurance Company
Auto Club Insurance Association
Auto-Owners Insurance Company
Citizens Insurance Company of America
Farm Bureau Insurance Company of Michigan
Home-Owners Insurance Company
North Pointe Insurance Company
Ohio Farmers Insurance Company (Westfield Group)
State Farm Mutual Insurance Company
The participating insurers write over 70% of Michigan’s total private passenger auto insurance market,
and as such, were able to provide a reliable and credible database for this analysis.
Each participating insurer provided data for all its Michigan policies in effect during calendar years
2000, 2001 and 2002. The losses included in the data call were for all claims that occurred in 2000,
2001, or 2002. All losses were valued as of March 31, 2003.
Data elements provided were written and earned premiums, earned car years, claim counts, and
incurred claim amounts valued as of March 31, 2003.
The data were summarized by coverage, zip code, limit of coverage and size of deductible. The
comprehensive losses were identified by cause of loss (i.e., fire, wind/hail, vandalism, total theft,
partial theft, glass, water/flood, animal collision, and all other).
The three-year database included a total count of records equivalent to 12.9 million car years (i.e., one
car insured for twelve months).
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Definition of Important Terms and Concepts
Private Passenger Automobiles
This study’s database reflects only the experience of vehicles commonly referred to as private
passenger automobiles. In the insurance business, private passenger automobiles include sedans,
coupes, station wagons, vans, pick-up trucks, and panel trucks used for personal pleasure, family and
business use.
Some restrictions apply if the vehicle is used for business purposes. A vehicle used for retail or
wholesale delivery, or a vehicle weighing more than 10,000 pounds, would not be included in the
definition of a private passenger automobile.
Also not included in the definition of private passenger automobiles are motorcycles, snowmobiles
and other off-road vehicles.
Automobile Insurance Coverages
The following automobile insurance coverages are available in Michigan and included in the study’s
database.
Bodily Injury (BI) liability protects the insured against monetary loss arising from legal liability for
injuries to a person in an auto accident.
Property Damage (PD) liability protects the insured against monetary loss resulting from legal
liability for damage to property of others in an auto accident.
Personal Injury Protection (PIP) pays to the insured the cost of medical, hospital, rehabilitation, loss
of wages, or loss of services resulting from injury to the insured or family member in an auto accident.
Property Protection (PPI) protects the insured from monetary loss resulting from his/her absolute
liability for damage caused by the insured automobile in Michigan to property other than vehicles and
their contents, except that it pays for damage to properly parked vehicles.
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Uninsured Motorist (UM) coverage protects the insured and family members against loss if injury is
caused by an uninsured motorist.
Underinsured Motorist (UIM) coverage protects the insured and family members against loss if
injury is caused by a negligent insured driver with bodily injury limits lower than the limits provided
under this coverage.
Comprehensive coverage pays for all losses to the insured vehicle, other than damage arising from an
auto accident. Examples of perils covered are theft or damage by fire, flood, hail, vandalism, or
collision with an animal.
Collision coverage pays for repairs to the insured vehicle if it is damaged in an automobile accident.
There are three kinds of collision coverage available. Limited collision pays only if the insured is 50%
or less at fault. Regular collision pays regardless of fault, with a deductible that always applies.
Broad collision pays regardless of fault, but the deductible does not apply if the insured is 50% or less
at fault.
The BI, PD, PIP and PPI coverages are referred to as “mandatory coverages” because all auto insureds
in Michigan are required to purchase these coverages. All other coverages are purchased at the option
of the insured.
In this report, references to the “liability coverages” are consistent with how that term is commonly
used in the insurance industry. Liability coverages include BI, PD, PIP, PPI, UM and UIM.
In this report, and commonly within the industry, the term “physical damage coverages” refers to the
comprehensive and collision coverages. For simplicity of analysis, we have combined the three
collision forms of coverage (i.e., broad, regular and limited) into a single collision coverage.
Comprehensive – Cause of Loss
Insurers commonly code their comprehensive loss data so as to identify the cause of loss. This study
provides separate analyses of the comprehensive losses for nine groupings of perils: fire (total and
partial fire damage), total theft, partial theft, vandalism, wind/hail, water/flood, animal collision,
glass/windshield, and all other.
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Claim Frequency
Claim frequency is the ratio of the number of insurance claims to an exposure base. In this study the
selected exposure base is one car insured for one year (i.e., earned car year). For example, a claim
frequency of .150 means there were 150 claims for every 1,000 cars insured. A claim frequency of
.150 can also be interpreted as a 15% chance, or likelihood, that a particular insured will incur a claim.
Average Cost Per Claim
The average cost of a claim is calculated as the total dollars of incurred claim losses divided by the
number of claims. This value is also commonly referred to as claim severity.
Pure Premium
The pure premium is the average cost of claims per insured car. It is calculated as the total dollars of
incurred claim losses divided by the number of insured cars. As shown in the following algebraic
formula, the pure premium is the product of the claim frequency times the average cost per claim.
Let:
N
= number of insured cars
C
= number of claims
D
= dollars of claim losses
C/N
= claim frequency
D/C
= average cost per claim (i.e., claim severity)
D/N
= pure premium.
Then:
(C/N) x (D/C)
= D/N = Pure Premium.
Since the pure premium is a combination of the probability of a claim occurring (i.e., claim frequency)
and the average cost of a claim once it occurs (i.e., claim severity), it is considered as the best measure
of risk for an individual insured, or for a group of insureds. An insured with an expected pure
premium of $450 would be considered a “higher risk” than an insured with an expected pure premium
of $300.
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Premiums
Premiums are recorded as “written premiums” at the beginning of the policy term. The written
premium is earned pro rata during the policy period. For example, an insurance premium of $500 for
an annual policy written on December 31, 2003 will be recorded as $500 of written premium for year
2003. By June 30, 2004, the insurer will have earned one-half (i.e., $250) of the premium and will
have recorded $250 of earned premium during the first six months of 2004.
Claim Losses
Claim losses include actual payments made to the claimants, plus amounts held in reserve for future
payments on claims that have already occurred. Most private passenger auto claims are quickly paid
and settled. But some claims, especially the liability claims, may not be completely settled for five
years or more. The loss reserve amounts are estimates of future payments. Loss reserves change as
more information becomes known and as partial payments on the claims are made.
There are a variety of accounting protocols for recording claim losses. Losses can be accounted for
according to the year in which the policy is written. These losses are referred to as “policy-year”
losses. An example would be a policy written in December 2003, with a claim occurring in January
2004. In this case the loss would be considered a policy-year 2003 loss because that was the year in
which the policy was written.
Losses can be accounted for according to the year in which the claim occurred. These losses are
referred to as “accident-year” losses. An example would be a policy written in December 2003 with a
claim occurring in January 2004. In this case the loss would be considered an accident-year 2004 loss,
even though the policy was written in 2003.
Another common accounting protocol for recording claim losses is referred to as “calendar-year”
losses. In this case any claim payments are recorded to the year in which the payments are made and
any changes in the reserve for future payments are recorded to the years in which the reserve changes
occur.
Loss Ratio
Claim losses are often expressed as a ratio to premiums. The total dollars of claim losses divided by
the total dollars of premiums is a loss ratio. For example, a loss ratio of .70 (i.e., 70%) means that
70% of the premium dollars were needed to fund the payment of claim losses.
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For most rate analyses, the accepted loss ratio to analyze is an incurred loss (usually on an accidentyear basis) divided by earned premiums. A ratio of incurred losses to written premiums is hardly ever
used because such a ratio will reflect a mismatch of the claim losses to the premiums used to fund the
losses.
An example may help clarify the mismatch problem. All policies written in 2003 will have the written
premium recorded to 2003, but some claims on those policies may not be incurred until 2004. All
policies written in 2004 will have the written premium recorded to 2004, but some claims on those
policies may not be incurred until 2005. If one were to relate accident-year 2004 incurred losses to
2004 written premium, there would be two sources of mismatch. There would be accident-year 2004
losses in the numerator that properly tie to 2003 written premium, not to the 2004 written premiums in
the denominator. There would also be 2004 written premiums in the denominator that tie to accidentyear 2005 losses, not to the 2004 losses in the numerator.
Expense Ratio
Expenses are often expressed as a ratio to premiums. Claim settlement expenses (e.g., legal or claim
investigation expenses) related to premiums is commonly referred to as a “loss adjustment expense
ratio.” Operational/underwriting expenses related to premiums are commonly referred to as an
“underwriting expense ratio.”
Profit
There are three types of “profit” ratios commonly used in insurance rate analyses. Each profit measure
relates to a specific portion of an insurer’s overall return.
The underwriting profit represents that portion of the premiums which remain after funding the claim
losses and expenses. For example, if claim losses in a particular year constituted 70% of premium and
all expenses totaled 25% of premium, the insurer would have experienced a 5% underwriting profit. If
claim losses constituted 80% of premium and all expenses totaled 25% of premium, the insurer would
have experienced a 5% underwriting loss.
In addition to the underwriting profit/loss, an insurer also earns investment income while the
premiums are being held to pay future claims and expenses. The investment income from premiums,
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plus the underwriting profit/loss, is commonly referred to as the operating profit. The operating profit
represents the return generated by the insurance operations.
Insurers are required to commit sufficient capital to guarantee the availability of funds to pay claims.
These capital funds also generate investment income. The investment income from the capital funds,
plus the insurance operating profit, represents the total return to the insurer. The total return must be
sufficient to compensate the insurer for placing its capital at risk in the insurance operation.
Insurance Rates
Insurance rates are established so as to be sufficient to fund the claim losses and the expenses expected
to be incurred during the time the insurance policy is in force. Expected future claim losses and
expenses cannot be determined by merely looking at what actually happened in the past. For example,
the fact that a house has not burned in the past does not mean the chances of a fire in the future are
zero. Or, just because an insured has not experienced an automobile accident in the past several years
does not reduce the likelihood of future accidents to zero. Determining these future probabilities is an
actuarial process. The future likelihood of losses, as to both the expected frequency and the expected
severity of claims, is the only basis for determining the reasonableness of insurance rates and the only
basis for determining if rates meet the Michigan rate standards of neither excessive, inadequate, nor
unfairly discriminatory.
In addition to the losses and expenses, insurance rates provide for a reasonable margin for
underwriting profit. The underwriting profit provision is determined so that the insurer’s total
expected return is consistent with the degree of risk to which the insurer’s capital is exposed.
Reasonable profit provisions, expense provisions and provisions for expected claim losses vary
significantly among insurers, thereby making insurance ratemaking an insurer-by-insurer calculation.
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Analysis and Findings
Industrywide Data
The National Association of Insurance Commissioners (NAIC) annually publishes loss, expense, and
profit data for each state and for each line of insurance. The NAIC data for Michigan are derived from
all insurers doing business in Michigan. The NAIC loss ratios are calendar-year incurred losses
divided by earned premiums. The premium and loss data are combined for all liability coverages and
for all physical damage coverages. The sum of the liability and physical damage data are also shown
as an all auto coverage total.
Exhibit I shows that Michigan’s private passenger auto loss ratio for all coverages combined reached a
23-year high of 98.3% in 2001, ending a sustained increase following the relatively low loss ratio of
53.1% in 1993. In a companion study of Michigan homeowners loss ratios, EPIC found exactly the
same pattern of increasing loss ratios from 1993 through 2001.
Total Auto
Michigan
Loss Ratio
Exhibit I
100.0%
95.0%
90.0%
85.0%
Loss Ratio
80.0%
75.0%
70.0%
65.0%
60.0%
55.0%
50.0%
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Calendar Year
Michigan
Michigan Average
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Exhibit II shows the NAIC countrywide private passenger auto loss ratios for all coverages combined.
The countrywide loss ratios reached a relative high point in 2001, after relative lows in 1997 and 1998.
The countrywide 2001 loss ratio was 72.7%, compared to the Michigan 2001 loss ratio of 98.3%. The
increase in the countrywide loss ratios persisted only from 1998 through 2001, whereas the Michigan
increase persisted from 1993 through 2001.
Total Auto
Countrywide
Loss Ratio
Exhibit II
78.0%
77.0%
76.0%
75.0%
74.0%
73.0%
Loss Ratio
72.0%
71.0%
70.0%
69.0%
68.0%
67.0%
66.0%
65.0%
64.0%
63.0%
62.0%
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Calendar Year
Countrywide
Countrywide Average
As shown in the following Exhibits III and IV, the increase in Michigan’s total auto loss ratio which
persisted from 1993 through 2001 was the result of an increase in the loss ratios for the liability
coverages, not the physical damage coverages. Publicly available loss trend data indicate this increase
in Michigan’s liability loss ratios was the result of rising claim costs, rather than an increase in the
frequency of claim occurrences.
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Auto Liability
Michigan
Loss Ratio
Exhibit III
140.0%
130.0%
120.0%
110.0%
Loss Ratio
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Calendar Year
Michigan
Michigan Average
Auto Physical Damage
Michigan
Loss Ratio
Exhibit IV
90.0%
85.0%
80.0%
Loss Ratio
75.0%
70.0%
65.0%
60.0%
55.0%
50.0%
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Calendar Year
Michigan
Michigan Average
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Exhibits V(a) through (h) show the average claim severities and the claim frequencies for the BI, PIP,
comprehensive and collision coverages in Michigan. These data are generated through the Fast-Track
Reporting System and represent data from a significant portion of the private passenger insurance
business written in Michigan.
As shown in Exhibit V(a), the frequency of BI claims in Michigan is very low compared to the
countrywide average claim frequency. This is because of the strength of the no-fault threshold in
Michigan. There has been a decline in Michigan’s BI claim frequencies since 1997 from about 3
claims per 1,000 insureds to about 2 claims per 1,000.
While Michigan’s BI claim frequencies have not recently changed dramatically, the average cost of BI
claims has increased dramatically. Over the last three years the average increase in claim costs for BI
have been approximately 5% annually.
Exhibits V(c) and (d) show that the increase in PIP losses has been due to a sharp increase in the
average cost of claims. While claim frequencies have remained relatively stable over the last three
years, the average increase in claim costs for PIP has been approximately 12% annually.
Exhibits V(e) through (h) show that average claim costs have been rising over the long term for the
physical damage coverages (i.e., comprehensive and collision). However, the increase in average
claim costs has been offset by a decrease in the frequency of physical damage claims.
Overall, we find that the sustained increase in Michigan’s total auto loss ratio from 1993 through 2001
was primarily due to an increase in the liability loss ratios, which were impacted primarily from an
increase in average claim costs, rather than any increase in the frequency of claim occurrence.
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Exhibit V(a)
Bodily Injury Liability
Claim Frequency per 1,000 Exposures
16.00
Paid Claim Frequency
14.00
12.00
10.00
8.00
6.00
4.00
2.00
03
-4
02
-4
00
-4
01
-4
99
-4
98
-4
97
-4
96
-4
95
-4
94
-4
93
-4
92
-4
91
-4
90
-4
89
-4
88
-4
87
-4
86
-4
85
-4
83
-4
84
-4
82
-4
80
-4
81
-4
79
-4
77
-4
78
-4
75
-4
76
-4
0.00
Period (Year Ending Quarter)
Source: ISO/NAII Private Passenger Fast Track Data
Michigan
Countrywide
Exhibit V(b)
Bodily Injury Liability
Average Claim Severity
$35,000
Average Claim Severity
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
Period (Year Ending Quarter)
Source: ISO/NAII Private Passenger Fast Track Data
Michigan
Countrywide
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03
-4
01
-4
02
-4
00
-4
99
-4
98
-4
97
-4
96
-4
95
-4
94
-4
93
-4
92
-4
91
-4
90
-4
89
-4
88
-4
87
-4
86
-4
85
-4
84
-4
83
-4
82
-4
81
-4
80
-4
78
-4
79
-4
77
-4
76
-4
75
-4
$0
Exhibit V(c)
Personal Injury Protection
Claim Frequency per 1,000 Exposures
25.00
Paid Claim Frequency
20.00
15.00
10.00
5.00
03
-4
01
-4
02
-4
00
-4
99
-4
98
-4
97
-4
96
-4
95
-4
94
-4
93
-4
92
-4
91
-4
89
-4
90
-4
88
-4
86
-4
87
-4
85
-4
83
-4
84
-4
82
-4
80
-4
81
-4
79
-4
78
-4
76
-4
77
-4
75
-4
0.00
Period (Year Ending Quarter)
Source: ISO/NAII Private Passenger Fast Track Data
Michigan
Countrywide
Exhibit V(d)
Personal Injury Protection
Average Claim Severity
$25,000
Average Claim Severity
$20,000
$15,000
$10,000
$5,000
Period (Year Ending Quarter)
Source: ISO/NAII Private Passenger Fast Track Data
Michigan
Countrywide
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03
-4
02
-4
01
-4
00
-4
99
-4
98
-4
97
-4
96
-4
95
-4
94
-4
93
-4
92
-4
91
-4
90
-4
89
-4
88
-4
87
-4
86
-4
85
-4
84
-4
83
-4
82
-4
81
-4
80
-4
79
-4
78
-4
77
-4
76
-4
75
-4
$0
Exhibit V(e)
Comprehensive
Claim Frequency per 1,000 Exposures
160.00
Paid Claim Frequency
140.00
120.00
100.00
80.00
60.00
40.00
20.00
03
-4
02
-4
01
-4
00
-4
99
-4
98
-4
97
-4
95
-4
96
-4
93
-4
94
-4
92
-4
90
-4
91
-4
89
-4
88
-4
87
-4
86
-4
84
-4
85
-4
83
-4
81
-4
82
-4
79
-4
80
-4
78
-4
76
-4
77
-4
75
-4
0.00
Period (Year Ending Quarter)
Source: ISO/NAII Private Passenger Fast Track Data
Michigan
Countrywide
Exhibit V(f)
Comprehensive
Average Claim Severity
$1,200
Average Claim Severity
$1,000
$800
$600
$400
$200
Period (Year Ending Quarter)
Source: ISO/NAII Private Passenger Fast Track Data
Michigan
Countrywide
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03
-4
02
-4
01
-4
00
-4
99
-4
98
-4
97
-4
96
-4
95
-4
94
-4
93
-4
92
-4
91
-4
90
-4
89
-4
87
-4
88
-4
86
-4
84
-4
85
-4
82
-4
83
-4
81
-4
79
-4
80
-4
77
-4
78
-4
76
-4
75
-4
$0
Exhibit V(g)
Collision
Claim Frequency per 1,000 Exposures
160.00
Paid Claim Frequency
140.00
120.00
100.00
80.00
60.00
40.00
20.00
03
-4
01
-4
02
-4
00
-4
99
-4
98
-4
97
-4
95
-4
96
-4
94
-4
92
-4
93
-4
91
-4
90
-4
89
-4
88
-4
87
-4
86
-4
85
-4
84
-4
83
-4
82
-4
81
-4
80
-4
79
-4
78
-4
76
-4
77
-4
75
-4
0.00
Period (Year Ending Quarter)
Source: ISO/NAII Private Passenger Fast Track Data
Michigan
Countrywide
Exhibit V(h)
Collision
Average Claim Severity
$3,000
Average Claim Severity
$2,500
$2,000
$1,500
$1,000
$500
Period (Year Ending Quarter)
Source: ISO/NAII Private Passenger Fast Track Data
Michigan
Countrywide
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©EPIC Consulting, LLC
03
-4
01
-4
02
-4
00
-4
98
-4
99
-4
97
-4
95
-4
96
-4
94
-4
93
-4
92
-4
91
-4
90
-4
89
-4
88
-4
87
-4
86
-4
85
-4
84
-4
83
-4
82
-4
81
-4
80
-4
79
-4
78
-4
77
-4
76
-4
75
-4
$0
Exhibit VI presents the underwriting profit ratios published by the NAIC. As previously described,
the underwriting profit is equal to earned premiums minus incurred losses and minus incurred
expenses. In 1993, when Michigan’s auto loss ratio was at its lowest, the Michigan auto earned
premium exceeded the total of incurred losses and expenses by 18.8% (i.e., underwriting profit ratio of
18.8%). In each year from 1993 through 2002, the Michigan auto earned premiums were insufficient
to fund the incurred losses and expenses. The underwriting losses were especially significant from
1998 through 2002 (the latest available data).
Underwriting profit/loss ratios ranged from -13.1% to -35.0% during the period 1998 through 2002.
As shown in Exhibits VII and VIII, the auto underwriting loss has been primarily a result of losses on
the liability coverages. In the period 1998 through 2002, the liability coverages in Michigan were
especially unprofitable with underwriting loss ratios ranging from -37.9% to -81.2%.
Total Auto
Michigan
Underwriting Profit
Exhibit VI
25.0%
20.0%
15.0%
10.0%
Underwriting Profit
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-30.0%
-35.0%
-40.0%
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Calendar Year
Michigan
Michigan Average
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Auto Liability
Michigan
Underwriting Profit
Exhibit VII
30.0%
20.0%
10.0%
0.0%
Underwriting Profit
-10.0%
-20.0%
-30.0%
-40.0%
-50.0%
-60.0%
-70.0%
-80.0%
-90.0%
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Calendar Year
Michigan
Michigan Average
Auto Physical Damage
Michigan
Underwriting Profit
Exhibit VIII
20.0%
Underwriting Profit
10.0%
0.0%
-10.0%
-20.0%
-30.0%
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Calendar Year
Michigan
Michigan Average
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For comparison purposes, Exhibit IX presents the total auto underwriting profit/loss ratios published
by the NAIC. While the countrywide data also show underwriting losses in the period 1998 through
2002 (i.e., range of -1.5% to -11.6%), those underwriting losses were low in comparison to Michigan’s
losses.
During the period 1980 through 2002, Michigan has experienced a total auto average underwriting
loss of -12.0%, while the countrywide average underwriting loss was -5.2% for the same time period.
Total Auto
Countrywide
Underwriting Profit
Exhibit IX
2.0%
1.0%
0.0%
-1.0%
-2.0%
Underwriting Profit
-3.0%
-4.0%
-5.0%
-6.0%
-7.0%
-8.0%
-9.0%
-10.0%
-11.0%
-12.0%
-13.0%
-14.0%
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Calendar Year
Countrywide
Countrywide Average
We acknowledge that underwriting profit ratios represent an incomplete picture of an insurer’s returns.
Obviously missing in the underwriting profit calculation is the income from investments. According
to the NAIC, total returns (i.e., underwriting profit plus investment income on policyholder supplied
funds and capital/surplus) in Michigan were negative in 2001 and 2002 and positive in 1998 – 2000.
During this five-year period (1998 – 2002) of especially bad underwriting losses, the average total
return was only 1.0%. Such a return is less than an insurer could have realized had it invested its
capital in a less risky business than Michigan auto insurance.
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Study Database – Statewide
Tables 1 through 10 summarize the premium and loss data in the study’s database for each auto
insurance coverage.
Table 1 – Bodily Injury Liability
Year
Earned
Car
Years
2000
4,291,861
$404,303,615
$238,270,537
7,526
58.93%
0.002
$31,660
$56
2001
4,346,017
405,374,968
198,436,807
6,910
48.95%
0.002
28,717
46
2002
4,331,855
422,782,572
152,203,952
7,004
36.00%
0.002
21,731
35
Total
12,969,732
$1,232,461,155
$588,911,297
21,440
47.78%
0.002
$27,468
$45
Incurred
Loss
Ratio
Claim
Frequency
Earned
Premiums
Incurred
Losses
Incurred
Claims
Incurred
Loss
Ratio
Claim
Frequency
Average
Claim
Severity
Pure
Premium
Table 2 – Property Damage Liability
Year
Earned
Car
Years
2000
4,291,184
$33,972,877
$25,689,107
19,432
75.62%
0.005
$1,322
$6
2001
4,345,252
36,226,027
25,684,984
19,433
70.90%
0.004
1,322
6
2002
4,330,660
40,209,142
26,481,871
19,751
65.86%
0.005
1,341
6
Total
12,967,096
$110,408,046
$77,855,962
58,616
70.52%
0.005
$1,328
$6
Incurred
Loss
Ratio
Claim
Frequency
Earned
Premiums
Incurred
Losses
Incurred
Claims
Average
Claim
Severity
Pure
Premium
Table 3 – Personal Injury Protection
Year
Earned
Car
Years
2000
4,294,264
$611,823,689
$773,558,233
34,598
126.43%
0.008
$22,358
$180
2001
4,348,260
647,007,506
765,215,894
36,747
118.27%
0.008
20,824
176
2002
4,334,487
816,254,018
656,727,285
37,924
80.46%
0.009
17,317
152
Total
12,977,012
$2,075,085,214
$2,195,501,412
109,269
105.80%
0.008
$20,093
$169
Earned
Premiums
Incurred
Losses
Incurred
Claims
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©EPIC Consulting, LLC
Average
Claim
Severity
Pure
Premium
Table 4 – Property Protection
Earned
Incurred
Average
Car
Earned
Incurred
Incurred
Loss
Claim
Claim
Pure
Year
Years
Premiums
Losses
Claims
Ratio
Frequency
Severity
Premium
2000
4,226,465
$59,225,284
$44,603,512
30,041
75.31%
0.007
$1,485
$11
2001
4,271,082
62,745,746
48,312,383
30,105
77.00%
0.007
1,605
11
2002
4,247,890
69,819,338
47,679,474
29,427
68.29%
0.007
1,620
11
Total
12,745,438
$191,790,368
$140,595,369
89,573
73.31%
0.007
$1,570
$11
Table 5 – UM/UIM
Earned
Incurred
Average
Car
Earned
Incurred
Incurred
Loss
Claim
Claim
Pure
Year
Years
Premiums
Losses
Claims
Ratio
Frequency
Severity
Premium
2000
4,100,606
$58,022,257
$28,849,258
1,071
49.72%
0.000
$26,937
$7
2001
4,176,405
59,681,520
25,777,152
1,041
43.19%
0.000
24,762
6
2002
4,175,833
61,554,004
14,835,796
798
24.10%
0.000
18,591
4
Total
12,452,844
$179,257,780
$69,462,206
2,910
38.75%
0.000
$23,870
$6
Table 6 – Total Liability
Incurred
Year
Earned
Incurred
Incurred
Loss
Premiums
Losses
Claims
Ratio
2000
$1,167,347,722
$1,110,970,648
92,668
95.17%
2001
1,211,035,766
1,063,427,220
94,236
87.81%
2002
1,410,619,074
897,928,378
94,904
63.65%
Total
$3,789,002,562
$3,072,326,246
281,808
81.09%
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Table 7 – Comprehensive
Earned
Incurred
Average
Car
Earned
Incurred
Incurred
Loss
Claim
Claim
Pure
Year
Years
Premiums
Losses
Claims
Ratio
Frequency
Severity
Premium
2000
3,680,511
$531,139,519
$361,696,143
407,307
68.10%
0.111
$888
$98
2001
3,751,400
540,519,691
376,108,841
432,276
69.58%
0.115
870
100
2002
3,738,092
548,056,821
368,922,278
419,108
67.31%
0.112
880
99
Total
11,170,002
$1,619,716,030
$1,106,727,262
1,258,691
68.33%
0.113
$879
$99
Table 8 – Collision
Earned
Incurred
Average
Car
Earned
Incurred
Incurred
Loss
Claim
Claim
Pure
Year
Years
Premiums
Losses
Claims
Ratio
Frequency
Severity
Premium
2000
3,412,519
$1,301,325,032
$936,448,311
405,891
71.96%
0.119
$2,307
$274
2001
3,478,157
1,372,003,255
976,361,413
418,329
71.16%
0.120
2,334
281
2002
3,454,776
1,446,402,963
979,431,444
390,128
67.71%
0.113
2,511
284
Total
10,345,452
$4,119,731,249
$2,892,241,168
1,214,348
70.20%
0.117
$2,382
$280
Table 9 – Total Physical Damage
Incurred
Year
Earned
Incurred
Incurred
Loss
Premiums
Losses
Claims
Ratio
2000
$1,832,464,550
$1,298,144,454
813,198
70.84%
2001
1,912,522,945
1,352,470,255
850,605
70.72%
2002
1,994,459,784
1,348,353,721
809,236
67.60%
Total
$5,739,447,279
$3,998,968,430
2,473,039
69.68%
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Table 10 – All Coverage Total
Incurred
Year
Earned
Incurred
Incurred
Loss
Premiums
Losses
Claims
Ratio
2000
$2,999,812,272
$2,409,115,103
905,866
80.31%
2001
3,123,558,711
2,415,897,474
944,841
77.34%
2002
3,405,078,857
2,246,282,099
904,140
65.97%
Total
$9,528,449,841
$7,071,294,676
2,754,847
74.21%
The loss data in the above Tables 1 – 10 are accident-year incurred losses valued as of March 31,
2003. Not all the claims in the database have been completely settled and almost certainly there will
be adjustments in the amounts held in reserve for future payments of these claims. Most of the future
change in the loss ratios will occur in the liability coverages because those claims usually take longer
to settle than do the physical damage claims. The largest increase in the loss ratios will occur in
accident-year 2002 because the 2002 claims were the most immature as of the loss evaluation date of
March 31, 2003. There will also be a significant change in the 2001 loss ratios, but that change will be
less than the change for 2002. The least change in the loss ratios will be for accident-year 2000,
because proportionately more of the 2000 claims had been settled by the March 31, 2003 valuation
date.
Because much of this study deals with a comparison of losses (e.g., one geographic area compared to
another), we concluded there was no need to adjust the accident-year losses in this study to their
estimated, ultimate levels. The accident-year losses used in the comparison analyses are equally
mature, or equally immature as the case may be. All losses are valued at the same March 31, 2003
valuation date.
If this study were an analysis of rate level adequacy or reasonableness, then the accident-year loss
ratios would have required adjustment to their estimated, ultimate levels. Readers of this study should
not conclude from Tables 1 – 10 that loss ratios were generally improving (i.e., decreasing) during the
period 2000 – 2003. Readers must be aware that the most recent accident-years in the study’s
database are the most immature and that those loss ratios will increase significantly as more of the
claims are settled.
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Solely for data editing purposes, we did adjust the statewide accident-year loss ratios for the liability
package of coverages and for the physical damage package of coverages to their estimated, ultimate
levels. The NAIC publishes Michigan-specific premium and loss data for the liability and physical
damage packages of coverage. The NAIC incurred losses are recorded on a calendar-year basis and
the incurred losses in this study’s database are recorded to the year in which the loss was incurred (i.e.,
accident-year). The two methods of accounting do not increase or decrease the amount of losses over
the long-run. The difference in the two accounting methods is entirely one of timing as to which year
the loss is recorded. This difference in timing means that we cannot expect the accident-year loss ratio
for a specific year in the study’s database to precisely match the NAIC’s calendar-year loss ratio for
that same year. However, after adjusting the accident-year loss ratios to their estimated, ultimate level
we anticipated the “adjusted” (i.e., estimated ultimate) accident-year loss ratios would be reasonably
close to the NAIC’s calendar-year loss ratios.
Exactly how the accident-year loss reserves and loss ratios will develop in the future will vary
significantly from insurer to insurer. That is one reason why rate adequacy must be judged on an
insurer-by-insurer basis. Since the study’s database did not provide sufficient data for a reliable
estimate of future loss reserve changes for each participating insurer, or for the participating insurers
as a whole, we relied on publicly available loss reserve development data, and judgment, to develop
the “adjusted” loss ratios shown below. The “adjusted” loss ratios are estimates of the loss ratios we
expect when all the claims in the study’s database for accident-years 2000, 2001 and 2002 are
completely settled.
Table 11 – Comparison of Liability Loss Ratios
Study’s Database
Year
NAIC
2000
102.2%
Actual
95.2%
Adjusted
97.1%
2001
136.9%
87.8%
95.7%
2002
112.4%
63.7%
83.5%
Average
117.0%
81.1%
91.6%
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Table 12 – Comparison of Physical Damage Loss Ratios
Study’s Database
Year
NAIC
2000
2001
72.7%
Actual
70.8%
Adjusted
70.8%
72.2%
70.7%
71.4%
2002
66.7%
67.6%
74.4%
Average
70.4%
69.7%
72.2%
Table 13 – Comparison of Total Auto Loss Ratios
Study’s Database
Year
NAIC
2000
84.6%
Actual
80.3%
Adjusted
81.0%
2001
98.3%
77.3%
80.8%
2002
87.0%
66.0%
78.1%
Average
89.9%
74.2%
79.9%
There is a great deal of similarity in the physical damage adjusted loss ratios for this study and the
NAIC’s calendar-year loss ratios. This consistency between the adjusted accident-year loss ratios and
calendar-year loss ratios is to be expected because physical damage claims are settled relatively
quickly and there is relatively little future development in accident-year loss ratios for the physical
damage coverages.
With respect to the liability coverages, the accident-year 2000 loss ratio from the study’s database is
reasonably consistent with the NAIC’s calendar-year 2000 loss ratio. We did observe significant
differences between the study’s accident-year loss ratios and the NAIC calendar-year loss ratios for
2001 and 2002. The possible reasons for the inconsistency in these loss ratios are:
1) we have underestimated the future upward development of the liability loss ratios for accidentyears 2001 and 2002, or
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2) paid and reserved losses for accident-years 2001 and 2002 have been underreported to us for
this study, or
3) during calendar-years 2001 and 2002, the insurance industry strengthened loss reserves for
accidents occurring prior to 2000, thereby increasing the calendar-year loss ratios for 2001 and
2002. Such a change in reserves would have no impact on the losses reported for this study.
If this study had been designed to study rate level adequacy or rate reasonableness, we would have
needed to further pursue the apparent differences between the study’s 2001 and 2002 liability loss
ratios and the calendar-year loss ratios published by the NAIC. Since this study is primarily a study of
the trend in claim frequencies and average claim severities, and comparisons of losses from one
geographical area to another, we judged that further reconciliation efforts of the two sets of loss ratios
were unnecessary. If there was an underreporting of losses for this study, we would expect the
underreporting to be uniform across the state and not bias the comparisons of claim frequencies, claim
severities and pure premiums across the geographical areas within Michigan.
Geographical Loss Variation
Auto insurance losses vary geographically. The geographical variation is different for each coverage
(i.e., BI, PD, PIP, PPI, UM, comprehensive and collision). How to best analyze this geographical
variation in losses and present the results, represented a formidable challenge to this study.
There exist no standard, or benchmark, territory definitions in Michigan which insurers use to assess
the risk and price the private passenger auto insurance coverages. We analyzed the rating territories
used by eight leading auto insurers and found a great difference in how these insurers define their
respective rating territories. This significant divergence in how rating territories are defined, and how
insurers assess geographic risk, is not surprising in this highly competitive marketplace.
Lacking a commonly used means of geographically subdividing Michigan’s loss data, we proceeded
with this analysis using five different types of geographical subdivisions of the data.
1) We ranked each zip code from high to low based on its claim frequency and aggregated the
loss data into ten claim frequency bands. Frequency bands were created separately for each
coverage. Maps of the frequency bands are presented in Appendix A.
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2) We ranked each zip code from high to low based on its claim severity and aggregated the loss
data into ten claim severity bands. Severity bands were created separately for each coverage.
Maps of the severity bands are presented in Appendix B.
3) We ranked each zip code from high to low based on its pure premium and aggregated the loss
data into ten pure premium bands. Pure premium bands were created separately for each
coverage. Maps of the pure premium bands are presented in Appendix C.
4) We aggregated the data for each form of the coverage by zip code into ten groups based on the
population density of each zip code. The population density for each zip code was determined
by U.S. Census data. A map of the population density bands is presented in Appendix D.
5) Utilizing the loss data for each coverage, we grouped zip codes that were most similar in the
risk of loss for each coverage. The maps of the territories for PIP, Comprehensive and
Collision are presented in Appendices E, F and G.
Catastrophe Losses
Auto insurance is susceptible to the occurrence of a cluster of weather-related claims affecting the
comprehensive coverage, or to single, jumbo claims arising from BI, PIP or UM/UIM coverages.
These catastrophe and jumbo claims can distort the losses in the year of occurrence. Actuaries
ordinarily remove these losses from the historical data and substitute long-term averages for these
types of claims.
The way the data were provided for this study did not permit the identification of every catastrophe or
jumbo claim which occurred in the 2000 – 2002 experience period. However, we were able to identify
at least some catastrophe losses. For the comprehensive coverage we identified a cluster of weatherrelated claims (i.e., 1,203) which occurred on 5/9/2000 and 6/9/2000.
In addition to removing the weather-related catastrophe claims we also limited the size of individual
claims to $50,000 for the BI, PIP and UM coverages. The physical damage coverages were limited to
$15,000 for a single claim. Capping the size of individual losses eliminated the potential for a single,
jumbo claim causing an unusual distortion in the loss experience for a zip code or geographical band.
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In our judgment, the removal of these catastrophe and jumbo claims permitted a more reliable
comparison of the losses across the geographical bands without the potential for distortions in the data
which can arise when a period as short as three years is being analyzed.
Frequency, Severity and Pure Premium Bands
One of the participating insurers could not provide its data with losses identified by zip code. Without
losses identified by zip code, we were forced to exclude this insurer’s data from the analysis of the
frequency, severity and pure premium bands (also excluded from the population density bands). Data
from nine of the participating insurers are summarized for each coverage in Exhibits X through XVI.
Exhibit X shows that the geographical area with the highest BI frequency also has the highest PD, PIP,
UM and collision frequencies. The band with the highest BI frequency has the lowest BI claim
severity. Even with a capping of individual BI claims, we find a significant geographical variation in
the average cost of BI claims (i.e., a high of $24,040 and a low of $10,052). The pattern of
geographical variation of BI claim costs does not duplicate the pattern of variation for the other
coverages. The area with the highest BI claim severity also has the highest UM severity and the
highest PIP severity, but the UM and PIP severities are relatively constant across the remaining nine
BI severity bands.
Exhibit XI shows significant geographical variation in PD claim frequencies and claim severities.
Areas of high PD claim frequencies tend to also have relatively high frequencies of BI and collision
claims. Areas of relatively high PD claim severities tend to have relatively low BI claim severities.
Exhibit XII shows areas of relatively high PIP claim frequencies are also relatively high areas of claim
frequencies for BI, UM, and collision. Areas of relatively high PIP claim costs are also relatively high
cost areas for BI.
Exhibit XIII shows that the geographical variation in PPI claim frequencies are inversely related to the
claim frequencies of the other coverages, with the exception of collision. The geographical variation
in PPI claim severities is inversely related to the claim severities for PD and UM.
Exhibit XIV shows that geographical areas with high UM claim frequencies tend to also have
relatively high claim frequencies for BI, PIP and collision. Surprisingly, areas with high UM claim
severities are not also areas with high claim severities for BI and PIP. We expected more similarity
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between these three coverages because the coverages pertain to the injuries to people. The costdrivers for the UM coverage are not also impacting the claim severities for BI and PIP. This may
suggest that the cost of a UM claim is driven more by the unique claim settlement process for UM,
than by the actual injuries.
Exhibit XV shows significant geographical variation for both the comprehensive claim frequency and
claim severity. There appears to be little connection between the frequency of comprehensive claims
and the frequency of claims for the other coverages. Areas of high claim severities for the
comprehensive coverage tend to be high cost areas for PIP and PPI.
Exhibit XVI shows that areas of high collision claim frequencies also tend to have relatively high BI,
PIP and UM claim frequencies. The areas with the highest collision claim severities also have
relatively high PIP, PPI and comprehensive severities.
We find some relationships between the claim frequencies for the individual coverages, especially
between BI, PIP, UM, and collision. But as a general rule, we cannot conclude that areas of high
claim frequencies for one coverage imply high claim frequencies for all coverages. Nor can we
generally conclude that areas of relatively high claim severities for one coverage imply relatively high
claim severities for all coverages.
This variation in the nature of the losses for each coverage makes it difficult to compare the private
passenger auto losses from one insurer to the next. Each insurer’s loss experience will be dependent
upon where its insureds are concentrated geographically and what optional coverages are being
purchased.
The variation in the nature of the losses for each coverage also means that the territory rate factors
(i.e., rate differentials between rating territories) will vary substantially from one coverage to the next.
A geographical territory that is high-rated for one coverage may not be high-rated for another
coverage.
Appendices A, B, C are maps of the frequency, severity and pure premium bands for each coverage.
The maps in Appendices A, B, C relate to the data presented in Exhibits X through XVI.
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Exhibit X
DATA BY FREQUENCY, SEVERITY, AND PURE PREMIUM BAND
BODILY INJURY
PREMIUM & CLAIM DATA BY FREQUENCY BAND
Frequency by Coverage
Personal
Frequency
Band
1
2
3
4
5
6
7
8
9
10
State
Earned
Property
Injury
Property
Uninsured
Ratio
Frequency
Severity
Premium
Damage
Insurance
Protection
Motorists
Comprehensive
Collision
141,552,255
127,198,569
113,839,474
122,541,419
117,414,889
116,352,389
109,316,720
110,820,002
105,130,160
104,893,397
58,516,891
47,453,733
41,214,843
38,783,834
37,367,241
35,771,452
31,940,431
27,698,541
26,857,659
20,320,880
41.3%
37.3%
36.2%
31.6%
31.8%
30.7%
29.2%
25.0%
25.5%
19.4%
0.0031
0.0021
0.0019
0.0017
0.0016
0.0015
0.0014
0.0013
0.0012
0.0009
15,617
18,322
18,399
18,174
18,480
19,170
18,431
17,893
18,587
19,081
48.16
39.03
34.42
31.67
30.44
29.52
26.32
23.02
22.19
16.26
0.0060
0.0047
0.0039
0.0045
0.0045
0.0044
0.0038
0.0043
0.0042
0.0031
0.0121
0.0094
0.0088
0.0087
0.0077
0.0080
0.0075
0.0075
0.0070
0.0065
0.0066
0.0069
0.0072
0.0068
0.0070
0.0071
0.0074
0.0069
0.0073
0.0072
0.0007
0.0003
0.0002
0.0003
0.0002
0.0002
0.0001
0.0002
0.0001
0.0001
0.1127
0.1164
0.1138
0.1082
0.1168
0.1052
0.1133
0.1113
0.1081
0.1215
0.1363
0.1294
0.1188
0.1221
0.1199
0.1167
0.1156
0.1150
0.1107
0.1037
1,169,059,275
365,925,505
31.3%
0.0017
17,946
30.07
0.0043
0.0083
0.0070
0.0002
0.1127
0.1187
Premium
Incurred
Losses
Loss
Pure
Personal
PREMIUM & CLAIM DATA BY SEVERITY BAND
Severity by Coverage
Personal
Personal
Severity
Earned
Incurred
Loss
Pure
Property
Injury
Property
Uninsured
Band
Premium
Losses
Ratio
Frequency
Severity
Premium
Damage
Insurance
Protection
1
2
3
4
5
6
7
8
9
10
State
Motorists
Comprehensive
Collision
107,790,633
118,132,872
116,091,037
116,287,578
117,916,594
118,983,200
121,832,981
121,775,921
120,777,782
109,470,678
44,498,081
42,974,628
39,136,279
34,955,388
37,728,760
39,080,492
37,345,476
35,882,350
33,948,609
20,375,443
41.3%
36.4%
33.7%
30.1%
32.0%
32.8%
30.7%
29.5%
28.1%
18.6%
0.0015
0.0017
0.0016
0.0015
0.0016
0.0017
0.0018
0.0018
0.0019
0.0017
24,040
20,963
20,267
19,463
18,950
18,762
17,218
16,498
14,652
10,052
36.78
35.05
32.17
28.74
30.42
32.17
30.70
29.85
28.00
16.79
1,505
1,364
1,121
1,259
1,179
1,265
1,339
1,372
1,532
1,777
10,020
9,582
8,625
9,010
9,458
9,216
9,431
9,362
9,551
9,544
1,428
1,498
1,605
1,622
1,576
1,619
1,847
1,491
1,659
1,451
22,381
19,285
17,056
15,416
17,739
16,128
16,374
17,105
17,006
18,873
767
747
734
810
829
837
869
1,000
969
883
2,333
2,335
2,344
2,312
2,348
2,272
2,328
2,341
2,350
2,284
1,169,059,275
365,925,505
31.3%
0.0017
17,946
30.07
1,370
9,373
1,581
17,472
842
2,326
PREMIUM & CLAIM DATA BY PURE PREMIUM BAND
Pure Premium by Coverage
Pure
Personal
Premium
Earned
Incurred
Loss
Band
Premium
Losses
Ratio
Frequency
1
2
3
4
5
6
7
8
9
10
State
Severity
Personal
Pure
Property
Injury
Property
Uninsured
Premium
Damage
Insurance
Protection
Motorists
Comprehensive
Collision
118,758,968
122,692,211
126,352,048
121,362,212
119,022,232
118,445,038
116,211,278
116,180,413
106,579,174
103,455,702
57,277,529
48,613,221
43,224,853
39,244,559
38,799,511
35,063,913
32,571,373
30,470,735
26,028,853
14,630,958
48.2%
39.6%
34.2%
32.3%
32.6%
29.6%
28.0%
26.2%
24.4%
14.1%
0.0023
0.0021
0.0019
0.0018
0.0016
0.0016
0.0015
0.0015
0.0014
0.0011
20,760
19,184
18,496
18,304
19,294
17,567
17,760
16,994
15,813
10,951
48.09
40.07
35.42
32.50
31.18
28.72
26.51
24.99
21.57
12.03
8.19
6.61
6.69
5.59
4.52
5.51
5.22
5.87
5.62
5.79
89.70
88.10
87.86
87.06
78.26
76.18
71.67
68.95
67.83
63.83
10.55
11.07
11.89
11.75
11.64
11.04
11.57
11.43
10.30
9.94
5.55
5.45
5.78
4.75
4.11
3.39
3.03
3.56
2.74
3.10
114.78
106.58
98.83
95.31
92.62
85.40
88.98
85.60
83.85
98.32
298.08
295.40
299.71
290.32
277.22
273.98
278.65
266.25
245.52
234.20
1,169,059,275
365,925,505
31.3%
0.0017
17,946
30.07
5.95
77.91
11.12
4.15
94.97
276.13
31
©EPIC Consulting, LLC
Exhibit XI
DATA BY FREQUENCY, SEVERITY, AND PURE PREMIUM BAND
PROPERTY DAMAGE
PREMIUM & CLAIM DATA BY FREQUENCY BAND
Frequency by Coverage
Personal
Personal
Frequency
Earned
Incurred
Loss
Pure
Bodily
Injury
Property
Uninsured
Band
Premium
Losses
Ratio
Frequency
Severity
Premium
Injury
Protection
Insurance
Motorists
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
10,852,813
11,629,742
11,432,987
11,365,993
11,320,977
10,209,955
9,895,820
9,154,489
8,775,968
8,348,772
15,576,353
8,405,927
7,046,120
7,163,527
5,913,452
6,324,185
6,565,848
5,973,398
5,365,629
4,088,630
143.5%
72.3%
61.6%
63.0%
52.2%
61.9%
66.3%
65.3%
61.1%
49.0%
0.0082
0.0058
0.0051
0.0047
0.0043
0.0040
0.0036
0.0032
0.0027
0.0019
1,600
1,175
1,126
1,269
1,132
1,295
1,480
1,543
1,623
1,747
13.11
6.82
5.75
5.93
4.90
5.19
5.37
4.93
4.42
3.31
0.0022
0.0016
0.0018
0.0016
0.0018
0.0017
0.0016
0.0015
0.0015
0.0014
0.0075
0.0088
0.0091
0.0087
0.0097
0.0087
0.0080
0.0082
0.0076
0.0069
0.0065
0.0070
0.0068
0.0067
0.0067
0.0074
0.0073
0.0074
0.0073
0.0073
0.0002
0.0002
0.0003
0.0003
0.0004
0.0002
0.0002
0.0002
0.0001
0.0001
0.1003
0.1081
0.1137
0.1034
0.1098
0.1110
0.1089
0.1127
0.1259
0.1336
0.1247
0.1296
0.1273
0.1198
0.1270
0.1195
0.1148
0.1149
0.1046
0.1022
State
102,987,516
72,423,071
70.3%
0.0043
1,370
5.95
0.0017
0.0083
0.0070
0.0002
0.1127
0.1187
PREMIUM & CLAIM DATA BY SEVERITY BAND
Severity by Coverage
Personal
Personal
Severity
Earned
Incurred
Loss
Pure
Bodily
Injury
Property
Uninsured
Band
Premium
Losses
Ratio
Frequency
Severity
Premium
Injury
Protection
Insurance
Motorists
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
8,962,401
9,045,340
9,336,751
10,338,020
10,011,740
11,016,583
10,380,989
11,090,509
11,588,347
11,216,835
15,034,713
8,818,505
7,078,483
7,287,929
6,582,777
7,150,665
5,847,050
5,537,697
5,450,720
3,634,534
167.8%
97.5%
75.8%
70.5%
65.8%
64.9%
56.3%
49.9%
47.0%
32.4%
0.0048
0.0039
0.0037
0.0041
0.0041
0.0049
0.0043
0.0045
0.0050
0.0042
2,587
1,870
1,579
1,432
1,313
1,205
1,108
1,001
896
739
12.31
7.30
5.85
5.93
5.38
5.85
4.81
4.51
4.45
3.08
15,617
17,360
17,970
17,219
17,757
17,838
19,197
19,000
19,126
18,912
10,539
9,651
9,543
9,468
9,421
8,614
9,521
8,981
9,007
9,357
1,303
1,388
1,395
1,638
1,478
1,764
1,558
1,796
1,788
1,742
20,616
17,782
20,119
17,817
18,755
17,601
17,124
15,068
16,088
16,829
813
830
800
874
778
841
760
804
883
1,054
2,257
2,225
2,260
2,317
2,309
2,371
2,296
2,388
2,369
2,420
State
102,987,516
72,423,071
70.3%
0.0043
1,370
5.95
17,946
9,373
1,581
17,472
842
2,326
PREMIUM & CLAIM DATA BY PURE PREMIUM BAND
Pure Premium by Coverage
Pure
Personal
Premium
Earned
Incurred
Loss
Band
Premium
Losses
Ratio
Frequency
Severity
Personal
Pure
Bodily
Injury
Property
Uninsured
Premium
Injury
Protection
Insurance
Motorists
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
10,360,823
10,430,465
10,321,254
10,385,527
10,755,240
10,425,592
9,958,843
10,294,896
10,563,443
9,491,433
18,428,275
9,232,135
7,774,715
7,061,594
6,535,347
5,973,828
5,404,523
4,795,860
4,311,632
2,905,163
177.9%
88.5%
75.3%
68.0%
60.8%
57.3%
54.3%
46.6%
40.8%
30.6%
0.0073
0.0050
0.0045
0.0044
0.0045
0.0040
0.0038
0.0039
0.0035
0.0024
2,068
1,529
1,427
1,319
1,196
1,211
1,162
1,024
993
961
15.09
7.59
6.47
5.79
5.38
4.89
4.47
4.03
3.50
2.35
32.10
30.62
30.83
29.80
28.76
30.64
28.55
30.33
31.16
27.93
66.04
70.15
76.37
75.56
76.93
79.62
79.08
86.09
89.03
80.30
10.13
11.83
11.17
10.60
11.32
10.66
12.16
11.74
11.44
10.22
3.04
3.89
4.08
4.19
3.36
4.49
4.04
4.71
5.57
4.12
82.96
95.10
94.01
96.89
89.62
102.12
84.63
90.20
106.54
107.40
259.37
289.68
283.62
281.51
284.76
275.39
269.18
274.34
293.22
248.34
State
102,987,516
72,423,071
70.3%
0.0043
1,370
5.95
30.07
77.91
11.12
4.15
94.97
276.13
32
©EPIC Consulting, LLC
Exhibit XII
DATA BY FREQUENCY, SEVERITY, AND PURE PREMIUM BAND
PERSONAL INJURY PROTECTION
PREMIUM & CLAIM DATA BY FREQUENCY BAND
Frequency by Coverage
Personal
Frequency
Earned
Incurred
Loss
Pure
Bodily
Property
Property
Uninsured
Band
Premium
Losses
Ratio
Frequency
Severity
Premium
Injury
Damage
Insurance
1
2
3
4
5
6
7
8
9
10
State
Motorists
Comprehensive
Collision
289,355,792
213,003,229
211,167,537
200,600,404
190,110,618
183,116,901
182,597,122
179,518,808
169,629,044
162,245,861
183,382,724
117,969,113
109,993,772
92,860,164
86,007,657
79,326,601
82,677,743
69,003,594
70,337,051
57,074,824
63.4%
55.4%
52.1%
46.3%
45.2%
43.3%
45.3%
38.4%
41.5%
35.2%
0.0146
0.0104
0.0094
0.0087
0.0081
0.0075
0.0071
0.0066
0.0059
0.0046
10,284
9,276
9,540
8,555
8,790
8,640
9,506
8,619
9,813
10,494
150.57
96.36
89.63
74.06
70.97
65.19
67.62
56.48
58.17
48.79
0.0024
0.0018
0.0017
0.0016
0.0016
0.0016
0.0015
0.0016
0.0016
0.0014
0.0043
0.0043
0.0044
0.0047
0.0045
0.0038
0.0042
0.0045
0.0049
0.0039
0.0068
0.0071
0.0069
0.0066
0.0072
0.0070
0.0069
0.0070
0.0073
0.0076
0.0009
0.0003
0.0003
0.0002
0.0002
0.0001
0.0001
0.0001
0.0001
0.0001
0.1175
0.1067
0.1103
0.1079
0.1102
0.1169
0.1214
0.1131
0.1098
0.1137
0.1561
0.1272
0.1227
0.1136
0.1194
0.1094
0.1122
0.1158
0.1088
0.1044
1,981,345,315
948,633,243
47.9%
0.0083
9,373
77.91
0.0017
0.0043
0.0070
0.0002
0.1127
0.1187
PREMIUM & CLAIM DATA BY SEVERITY BAND
Severity by Coverage
Personal
Severity
Earned
Incurred
Loss
Pure
Bodily
Property
Property
Uninsured
Band
Premium
Losses
Ratio
Frequency
Severity
Premium
Injury
Damage
Insurance
1
2
3
4
5
6
7
8
9
10
State
Motorists
Comprehensive
Collision
195,774,688
204,902,683
219,200,814
214,805,060
186,863,453
196,621,656
196,870,692
200,001,625
186,475,371
179,829,274
117,693,326
108,707,219
121,073,751
110,144,829
88,742,363
94,543,675
87,183,403
90,078,753
72,845,336
57,620,589
60.1%
53.1%
55.2%
51.3%
47.5%
48.1%
44.3%
45.0%
39.1%
32.0%
0.0079
0.0082
0.0097
0.0087
0.0079
0.0083
0.0083
0.0086
0.0081
0.0075
12,208
10,853
10,209
10,245
9,243
9,394
8,709
8,753
7,417
6,294
96.52
89.15
98.84
89.30
72.77
77.82
72.29
75.09
59.84
47.20
19,138
17,824
18,712
17,474
18,395
17,117
18,635
17,109
18,380
16,705
1,716
1,346
1,207
1,552
1,329
1,351
1,266
1,256
1,249
1,502
1,439
1,553
1,974
1,540
1,443
1,509
1,620
1,615
1,583
1,553
18,977
16,382
17,449
17,479
17,687
18,687
15,654
15,889
18,302
18,884
837
895
1,000
953
723
816
776
889
752
787
2,342
2,316
2,457
2,314
2,267
2,346
2,313
2,345
2,294
2,250
1,981,345,315
948,633,243
47.9%
0.0083
9,373
77.91
17,946
1,370
1,581
17,472
842
2,326
PREMIUM & CLAIM DATA BY PURE PREMIUM BAND
Pure Premium by Coverage
Pure
Personal
Premium
Earned
Incurred
Loss
Band
Premium
Losses
Ratio
Frequency
1
2
3
4
5
6
7
8
9
10
State
Pure
Bodily
Property
Property
Uninsured
Severity
Premium
Injury
Damage
Insurance
Motorists
Comprehensive
Collision
250,618,557
221,374,208
200,696,484
202,779,620
194,993,592
195,155,527
190,246,370
184,838,704
175,542,613
165,099,638
162,384,431
127,698,588
107,695,573
103,183,049
92,617,698
90,044,175
81,172,094
74,484,466
62,337,056
47,016,115
64.8%
57.7%
53.7%
50.9%
47.5%
46.1%
42.7%
40.3%
35.5%
28.5%
0.0115
0.0097
0.0089
0.0087
0.0084
0.0083
0.0075
0.0071
0.0067
0.0062
11,511
10,748
9,988
9,618
9,069
8,902
8,884
8,595
7,598
6,373
132.80
104.42
88.77
83.21
75.88
73.96
66.97
60.87
51.25
39.63
36.08
34.81
30.80
28.49
30.93
31.37
29.72
28.02
27.78
22.53
5.06
5.85
5.05
6.36
6.19
5.65
5.85
5.81
7.15
6.58
12.46
11.14
12.33
10.79
10.65
10.69
11.17
10.46
10.83
10.71
11.03
5.59
4.16
3.74
3.58
3.33
2.90
2.60
2.22
2.23
157.00
116.30
86.29
94.81
87.40
83.12
78.49
84.33
77.12
88.00
338.99
304.41
276.74
264.36
276.64
278.75
263.42
261.74
258.16
241.07
1,981,345,315
948,633,243
47.9%
0.0083
9,373
77.91
30.07
5.95
11.12
4.15
94.97
276.13
33
©EPIC Consulting, LLC
Exhibit XIII
DATA BY FREQUENCY, SEVERITY, AND PURE PREMIUM BAND
PERSONAL PROPERTY INSURANCE
PREMIUM & CLAIM DATA BY FREQUENCY BAND
Frequency by Coverage
Personal
Frequency
Earned
Incurred
Loss
Pure
Bodily
Property
Injury
Uninsured
Band
Premium
Losses
Ratio
Frequency
Severity
Premium
Injury
Damage
Protection
Motorists
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
16,818,672
15,810,183
17,032,892
18,519,192
19,463,680
18,404,570
19,609,638
18,896,627
19,287,870
20,167,411
16,850,560
13,206,125
13,426,241
13,509,969
15,138,368
13,175,418
13,335,920
12,052,697
11,946,678
10,227,186
100.2%
83.5%
78.8%
73.0%
77.8%
71.6%
68.0%
63.8%
61.9%
50.7%
0.0097
0.0083
0.0078
0.0074
0.0071
0.0067
0.0065
0.0062
0.0058
0.0050
1,424
1,357
1,474
1,514
1,768
1,637
1,725
1,674
1,742
1,687
13.88
11.31
11.43
11.23
12.47
11.03
11.13
10.30
10.09
8.36
0.0015
0.0016
0.0015
0.0016
0.0018
0.0017
0.0017
0.0016
0.0017
0.0020
0.0037
0.0037
0.0037
0.0041
0.0043
0.0048
0.0049
0.0048
0.0046
0.0049
0.0073
0.0078
0.0077
0.0085
0.0087
0.0081
0.0090
0.0083
0.0088
0.0089
0.0001
0.0002
0.0002
0.0002
0.0002
0.0002
0.0003
0.0003
0.0003
0.0003
0.1075
0.1095
0.1088
0.1012
0.1067
0.1085
0.1126
0.1210
0.1260
0.1257
0.1233
0.1166
0.1175
0.1168
0.1221
0.1156
0.1255
0.1222
0.1160
0.1112
State
184,010,737
132,869,163
72.2%
0.0070
1,581
11.12
0.0017
0.0043
0.0083
0.0002
0.1127
0.1187
PREMIUM & CLAIM DATA BY SEVERITY BAND
Severity by Coverage
Personal
Severity
Bodily
Property
Injury
Uninsured
Ratio
Frequency
Severity
Premium
Injury
Damage
Protection
Motorists
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
24,123,027
20,950,713
19,715,577
18,724,422
17,392,372
18,051,285
16,772,134
16,214,333
16,037,088
16,029,785
20,375,457
16,040,097
14,513,326
13,659,238
12,136,509
12,324,435
12,232,820
11,816,785
10,907,885
8,862,610
84.5%
76.6%
73.6%
72.9%
69.8%
68.3%
72.9%
72.9%
68.0%
55.3%
0.0065
0.0067
0.0067
0.0069
0.0066
0.0072
0.0073
0.0076
0.0076
0.0072
2,620
1,954
1,809
1,661
1,559
1,458
1,373
1,297
1,205
1,040
17.08
13.18
12.13
11.50
10.32
10.45
10.03
9.88
9.15
7.47
17,303
18,995
19,352
18,191
17,972
18,010
16,961
18,373
16,932
17,345
1,144
1,101
1,102
1,322
1,275
1,276
1,526
1,618
1,738
1,864
10,163
9,435
9,104
9,150
8,310
9,195
9,485
9,064
9,485
10,059
15,611
15,111
15,905
16,990
16,514
18,838
22,868
20,230
20,163
24,759
1,365
1,006
848
781
716
740
706
729
766
794
2,545
2,430
2,370
2,333
2,357
2,313
2,139
2,208
2,184
2,254
State
184,010,737
132,869,163
72.2%
0.0070
1,581
11.12
17,946
1,370
9,373
17,472
842
2,326
Band
Earned
Premium
Incurred
Losses
Loss
Pure
PREMIUM & CLAIM DATA BY PURE PREMIUM BAND
Pure Premium by Coverage
Pure
Personal
Premium
Earned
Incurred
Loss
Band
Premium
Losses
Ratio
Frequency
Severity
Pure
Bodily
Property
Injury
Uninsured
Premium
Injury
Damage
Protection
Motorists
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
22,103,604
19,668,850
19,445,628
18,474,563
17,854,832
17,406,281
17,179,589
16,790,737
17,662,330
17,424,322
22,281,708
16,301,140
14,752,307
13,894,237
13,202,004
12,243,441
11,580,919
10,763,127
9,846,684
8,003,595
100.8%
82.9%
75.9%
75.2%
73.9%
70.3%
67.4%
64.1%
55.7%
45.9%
0.0080
0.0076
0.0075
0.0073
0.0073
0.0072
0.0069
0.0068
0.0062
0.0057
2,323
1,810
1,685
1,617
1,503
1,440
1,407
1,320
1,324
1,142
18.52
13.78
12.57
11.79
11.00
10.30
9.68
9.02
8.25
6.48
33.76
29.69
33.38
28.13
28.59
29.59
30.01
28.73
28.75
30.11
5.41
5.17
5.23
5.62
5.53
6.18
5.78
6.80
5.84
7.87
100.19
86.29
88.42
73.80
75.89
73.42
68.21
67.95
71.29
73.98
7.82
4.47
5.53
2.95
4.13
3.96
2.75
2.30
4.26
3.28
131.99
97.98
106.09
76.39
83.14
91.90
80.87
85.99
92.81
102.38
340.46
296.75
313.83
278.53
273.17
265.84
265.75
240.26
253.70
230.60
State
184,010,737
132,869,163
72.2%
0.0070
1,581
11.12
30.07
5.95
77.91
4.15
94.97
276.13
34
©EPIC Consulting, LLC
Exhibit XIV
DATA BY FREQUENCY, SEVERITY, AND PURE PREMIUM BAND
UNINSURED MOTORISTS
PREMIUM & CLAIM DATA BY FREQUENCY BAND
Frequency by Coverage
Personal
Personal
Frequency
Earned
Incurred
Loss
Pure
Bodily
Property
Injury
Property
Band
Premium
Losses
Ratio
Frequency
Severity
Premium
Injury
Damage
Protection
Insurance
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
24,189,333
17,437,381
16,952,500
16,936,892
16,434,398
15,809,274
15,960,111
15,432,507
15,545,467
13,935,713
19,347,771
7,212,569
5,452,770
4,681,045
4,038,461
3,391,834
2,290,680
1,502,980
409,110
-
80.0%
41.4%
32.2%
27.6%
24.6%
21.5%
14.4%
9.7%
2.6%
0.0%
0.0010
0.0003
0.0003
0.0002
0.0002
0.0001
0.0001
0.0001
0.0000
0.0000
16,636
17,986
17,310
17,467
19,416
20,809
17,486
16,700
15,152
0
16.59
6.27
4.70
3.98
3.47
2.91
1.93
1.30
0.35
0.00
0.0024
0.0018
0.0018
0.0016
0.0015
0.0015
0.0016
0.0016
0.0015
0.0015
0.0046
0.0045
0.0050
0.0044
0.0045
0.0043
0.0049
0.0041
0.0040
0.0034
0.0133
0.0093
0.0084
0.0084
0.0078
0.0075
0.0072
0.0070
0.0071
0.0070
0.0065
0.0070
0.0067
0.0067
0.0071
0.0073
0.0072
0.0073
0.0072
0.0074
0.1162
0.1064
0.1047
0.1132
0.1085
0.1150
0.1087
0.1133
0.1157
0.1260
0.1517
0.1236
0.1227
0.1168
0.1176
0.1172
0.1165
0.1123
0.1107
0.0989
State
168,633,575
48,327,219
28.7%
0.0002
17,472
4.15
0.0017
0.0043
0.0083
0.0070
0.1127
0.1187
PREMIUM & CLAIM DATA BY SEVERITY BAND
Severity by Coverage
Severity
Band
Earned
Premium
Incurred
Losses
Loss
Pure
Personal
Personal
Bodily
Property
Injury
Property
Ratio
Frequency
Severity
Premium
Injury
Damage
Protection
Insurance
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
15,231,674
16,208,274
17,597,061
18,154,919
19,624,451
18,120,822
17,301,511
16,595,802
15,529,861
14,269,200
7,603,071
7,051,508
6,222,867
7,777,896
8,515,992
5,174,297
3,871,414
1,822,176
287,998
-
49.9%
43.5%
35.4%
42.8%
43.4%
28.6%
22.4%
11.0%
1.9%
0.0%
0.0002
0.0002
0.0002
0.0004
0.0005
0.0003
0.0003
0.0002
0.0001
0.0000
35,363
25,830
21,835
18,475
15,683
13,947
11,522
8,245
2,851
0
6.50
6.11
5.31
6.74
7.31
4.42
3.36
1.57
0.25
0.00
17,850
18,166
18,374
18,161
18,109
17,939
18,691
17,147
17,323
17,651
1,563
1,411
1,170
1,321
1,203
1,186
1,143
1,392
1,560
1,926
9,901
8,788
9,379
9,301
9,826
9,227
9,314
8,799
9,269
9,955
1,351
1,537
1,756
1,611
1,718
1,701
1,721
1,703
1,424
1,312
708
744
822
919
1,087
957
843
783
757
839
2,253
2,262
2,343
2,342
2,392
2,405
2,302
2,306
2,355
2,270
State
168,633,575
48,327,219
28.7%
0.0002
17,472
4.15
17,946
1,370
9,373
1,581
842
2,326
PREMIUM & CLAIM DATA BY PURE PREMIUM BAND
Pure Premium by Coverage
Pure
Premium
Band
Earned
Premium
Incurred
Losses
Loss
Pure
Severity
Personal
Personal
Bodily
Property
Injury
Property
Ratio
Frequency
Premium
Injury
Damage
Protection
Insurance
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
22,820,220
17,320,877
17,290,077
16,874,474
16,766,354
16,742,963
15,537,470
15,861,656
15,846,037
13,573,446
20,196,643
7,674,768
6,147,297
4,484,248
3,925,228
2,875,928
1,959,146
947,895
116,068
-
88.5%
44.3%
35.6%
26.6%
23.4%
17.2%
12.6%
6.0%
0.7%
0.0%
0.0009
0.0003
0.0002
0.0002
0.0002
0.0002
0.0001
0.0001
0.0000
0.0000
19,723
20,743
21,125
15,845
14,538
13,314
13,237
8,617
2,149
-
17.47
6.64
5.25
3.85
3.30
2.44
1.69
0.80
0.10
0.00
35.70
33.89
30.67
32.29
28.87
30.49
27.33
25.49
29.04
27.05
6.36
5.11
6.15
5.27
5.22
6.61
5.90
6.50
5.90
6.52
130.21
92.09
80.39
74.39
73.12
66.78
67.13
59.30
66.80
69.71
12.68
11.01
11.37
11.66
11.90
11.24
10.38
11.02
10.20
9.71
172.53
95.30
92.42
80.43
85.21
75.99
78.04
77.28
92.50
105.52
368.09
299.19
270.17
282.05
276.97
275.21
253.95
260.94
249.94
224.75
State
168,633,575
48,327,219
28.7%
0.0002
17,472
4.15
30.07
5.95
77.91
11.12
94.97
276.13
35
©EPIC Consulting, LLC
Exhibit XV
DATA BY FREQUENCY, SEVERITY, AND PURE PREMIUM BAND
COMPREHENSIVE
PREMIUM & CLAIM DATA BY FREQUENCY BAND
Frequency by Coverage
Personal
Personal
Frequency
Earned
Incurred
Loss
Pure
Bodily
Property
Injury
Property
Uninsured
Band
Premium
Losses
Ratio
Frequency
Severity
Premium
Injury
Damage
Protection
Insurance
1
2
3
4
5
6
7
8
9
10
State
Motorists
Collision
164,383,911
154,726,426
169,635,686
171,939,957
150,407,899
153,135,377
151,552,802
147,790,679
146,411,882
131,667,581
148,209,750
118,421,210
126,904,351
116,198,645
91,775,703
93,004,207
85,588,924
81,117,725
79,054,041
60,156,088
90.2%
76.5%
74.8%
67.6%
61.0%
60.7%
56.5%
54.9%
54.0%
45.7%
0.1702
0.1444
0.1273
0.1166
0.1109
0.1037
0.0982
0.0928
0.0867
0.0763
828
775
943
941
785
851
828
830
876
749
140.93
111.92
120.07
109.73
87.08
88.30
81.31
76.96
75.94
57.11
0.0017
0.0016
0.0017
0.0017
0.0015
0.0016
0.0017
0.0016
0.0018
0.0019
0.0038
0.0036
0.0036
0.0040
0.0039
0.0043
0.0050
0.0044
0.0053
0.0057
0.0085
0.0078
0.0088
0.0094
0.0081
0.0081
0.0083
0.0086
0.0083
0.0072
0.0066
0.0067
0.0069
0.0066
0.0072
0.0070
0.0075
0.0071
0.0076
0.0073
0.0002
0.0002
0.0003
0.0004
0.0002
0.0002
0.0002
0.0002
0.0002
0.0002
0.1118
0.1107
0.1164
0.1214
0.1222
0.1239
0.1273
0.1217
0.1239
0.1075
1,541,652,199
1,000,430,645
64.9%
0.1127
842
94.97
0.0017
0.0043
0.0083
0.0070
0.0002
0.1187
PREMIUM & CLAIM DATA BY SEVERITY BAND
Severity by Coverage
Personal
Personal
Severity
Earned
Incurred
Loss
Pure
Bodily
Property
Injury
Property
Uninsured
Band
Premium
Losses
Ratio
Frequency
Severity
Premium
Injury
Damage
Protection
Insurance
1
2
3
4
5
6
7
8
9
10
State
Motorists
Collision
246,568,657
160,566,143
149,926,213
143,342,579
145,853,295
143,475,907
142,019,676
134,079,774
140,933,010
134,886,945
202,639,319
114,081,545
102,869,132
100,009,731
88,440,101
83,456,936
81,807,892
71,617,373
77,833,431
77,675,184
82.2%
71.0%
68.6%
69.8%
60.6%
58.2%
57.6%
53.4%
55.2%
57.6%
0.1136
0.1077
0.1088
0.1153
0.1082
0.1078
0.1109
0.1024
0.1194
0.1341
1,690
992
891
823
767
730
699
665
625
569
191.98
106.88
96.95
94.93
82.99
78.66
77.48
68.12
74.55
76.28
17,213
18,871
18,066
16,335
18,045
17,690
17,750
18,600
18,137
19,338
1,134
1,293
1,457
1,815
1,503
1,302
1,311
1,322
1,255
1,283
10,561
10,082
9,666
9,811
9,069
8,832
8,489
8,538
8,225
9,417
2,110
1,834
1,540
1,439
1,443
1,493
1,500
1,425
1,556
1,478
15,581
16,026
19,443
18,800
19,044
18,652
17,959
18,896
20,662
19,790
2,582
2,373
2,311
2,295
2,266
2,248
2,280
2,217
2,286
2,294
1,541,652,199
1,000,430,645
64.9%
0.1127
842
94.97
17,946
1,370
9,373
1,581
17,472
2,326
PREMIUM & CLAIM DATA BY PURE PREMIUM BAND
Pure Premium by Coverage
Pure
Personal
Premium
Earned
Incurred
Loss
Band
Premium
Losses
Ratio
Frequency
1
2
3
4
5
6
7
8
9
10
State
Severity
Personal
Pure
Bodily
Property
Injury
Property
Uninsured
Premium
Injury
Damage
Protection
Insurance
Motorists
Collision
236,935,106
159,623,110
159,405,435
149,453,410
149,553,843
147,865,924
141,784,911
136,080,962
140,804,796
120,144,702
219,355,229
125,903,777
109,153,195
99,065,566
90,991,019
85,456,270
77,299,820
71,449,131
66,595,468
55,161,170
92.6%
78.9%
68.5%
66.3%
60.8%
57.8%
54.5%
52.5%
47.3%
45.9%
0.1400
0.1343
0.1251
0.1213
0.1176
0.1095
0.1040
0.0993
0.0950
0.0805
1,488
876
830
777
743
730
707
681
660
667
208.33
117.68
103.87
94.22
87.34
79.96
73.48
67.57
62.75
53.70
37.12
31.12
31.99
29.02
29.88
27.84
27.56
26.69
29.25
29.80
5.58
5.10
5.15
5.58
5.20
5.63
6.33
7.05
6.02
8.04
132.89
85.18
84.43
79.31
70.00
70.28
67.53
63.39
58.50
63.83
12.78
10.37
11.49
10.68
11.35
11.01
10.62
10.99
11.30
10.61
12.71
3.73
3.86
3.38
3.79
2.83
3.13
2.67
2.68
2.26
372.22
273.37
280.09
270.22
268.16
271.53
259.56
268.23
268.81
230.47
1,541,652,199
1,000,430,645
64.9%
0.1127
842
94.97
30.07
5.95
77.91
11.12
4.15
276.13
36
©EPIC Consulting, LLC
Exhibit XVI
DATA BY FREQUENCY, SEVERITY, AND PURE PREMIUM BAND
COLLISION
PREMIUM & CLAIM DATA BY FREQUENCY BAND
Frequency by Coverage
Frequency
Earned
Band
Premium
1
2
3
4
5
6
7
8
9
10
State
Incurred
Losses
Loss
Pure
Bodily
Personal
Personal
Property
Injury
Property
Uninsured
Ratio
Frequency
Severity
Premium
Injury
Damage
Protection
Insurance
Motorists
Comprehensive
561,267,126
431,949,130
429,490,193
415,570,326
406,255,650
375,528,303
347,933,295
348,316,657
327,782,280
307,451,592
410,030,893
307,809,080
293,444,907
279,608,755
268,830,207
254,285,668
239,633,139
235,170,446
216,399,572
190,917,326
73.1%
71.3%
68.3%
67.3%
66.2%
67.7%
68.9%
67.5%
66.0%
62.1%
0.1698
0.1381
0.1299
0.1244
0.1192
0.1138
0.1075
0.1020
0.0959
0.0852
2,446
2,280
2,312
2,268
2,310
2,289
2,290
2,351
2,315
2,363
415.18
314.89
300.34
282.14
275.28
260.54
246.29
239.75
221.85
201.21
0.0023
0.0018
0.0015
0.0016
0.0016
0.0015
0.0016
0.0015
0.0017
0.0017
0.0048
0.0049
0.0052
0.0044
0.0046
0.0040
0.0035
0.0034
0.0040
0.0047
0.0130
0.0092
0.0083
0.0082
0.0080
0.0076
0.0075
0.0073
0.0075
0.0067
0.0073
0.0075
0.0069
0.0070
0.0069
0.0073
0.0073
0.0070
0.0067
0.0066
0.0008
0.0002
0.0002
0.0002
0.0002
0.0002
0.0001
0.0001
0.0001
0.0001
0.1132
0.0960
0.1061
0.1038
0.1066
0.1149
0.1222
0.1320
0.1198
0.1112
3,951,544,552
2,696,129,994
68.2%
0.1187
2,326
276.13
0.0017
0.0043
0.0083
0.0070
0.0002
0.1127
PREMIUM & CLAIM DATA BY SEVERITY BAND
Severity by Coverage
Personal
Personal
Severity
Earned
Incurred
Loss
Pure
Bodily
Property
Injury
Property
Uninsured
Band
Premium
Losses
Ratio
Frequency
Severity
Premium
Injury
Damage
Protection
Insurance
1
2
3
4
5
6
7
8
9
10
State
Motorists
Comprehensive
496,420,623
451,709,719
424,537,187
421,800,514
398,624,602
384,709,946
368,030,878
347,432,642
333,162,019
325,116,423
352,115,968
315,993,636
287,089,774
281,153,131
262,212,199
262,815,711
248,636,185
234,195,372
224,006,731
227,911,288
70.9%
70.0%
67.6%
66.7%
65.8%
68.3%
67.6%
67.4%
67.2%
70.1%
0.1296
0.1230
0.1203
0.1195
0.1126
0.1181
0.1156
0.1115
0.1116
0.1258
2,779
2,553
2,472
2,407
2,351
2,296
2,219
2,134
2,049
1,917
360.18
313.97
297.45
287.59
264.71
271.13
256.56
238.00
228.76
241.21
17,804
17,671
18,758
19,533
17,592
18,306
19,008
17,277
16,380
17,265
1,390
1,385
1,260
1,055
1,328
1,304
1,313
1,592
1,681
1,473
10,694
9,457
9,561
8,778
8,910
9,060
9,516
9,570
8,700
8,851
2,000
1,696
1,793
1,681
1,572
1,620
1,550
1,389
1,323
1,377
17,065
16,901
18,838
16,104
17,526
14,760
18,365
18,780
18,558
20,819
1,246
867
766
787
790
823
846
763
717
728
3,951,544,552
2,696,129,994
68.2%
0.1187
2,326
276.13
17,946
1,370
9,373
1,581
17,472
842
PREMIUM & CLAIM DATA BY PURE PREMIUM BAND
Pure Premium by Coverage
Pure
Personal
Premium
Earned
Incurred
Loss
Band
Premium
Losses
Ratio
Frequency
1
2
3
4
5
6
7
8
9
10
State
Severity
Personal
Pure
Bodily
Property
Injury
Property
Uninsured
Premium
Injury
Damage
Protection
Insurance
Motorists
Comprehensive
569,186,267
447,929,418
436,987,087
417,467,065
391,890,642
377,219,146
347,199,104
329,992,125
323,080,420
310,593,278
414,932,456
314,396,237
293,839,567
280,662,920
265,872,135
260,331,338
237,905,389
227,361,087
211,355,785
189,473,081
72.9%
70.2%
67.2%
67.2%
67.8%
69.0%
68.5%
68.9%
65.4%
61.0%
0.1674
0.1327
0.1271
0.1236
0.1198
0.1143
0.1086
0.1050
0.1000
0.0903
2,570
2,432
2,396
2,323
2,288
2,287
2,271
2,222
2,165
2,094
430.24
322.86
304.46
287.23
274.18
261.33
246.77
233.30
216.40
189.06
40.71
32.36
31.83
31.20
28.09
27.54
28.92
27.28
28.83
24.95
6.10
5.61
5.30
4.91
5.45
4.89
5.99
6.03
5.95
9.02
135.77
82.75
81.68
74.08
65.79
72.09
70.35
69.83
68.84
61.41
15.19
12.10
11.88
11.82
11.11
10.40
10.56
9.73
9.32
9.47
14.08
3.78
4.25
3.29
2.90
3.26
2.65
2.83
2.71
2.06
180.02
93.37
89.19
78.40
82.39
85.10
84.04
85.23
89.77
86.26
3,951,544,552
2,696,129,994
68.2%
0.1187
2,326
276.13
30.07
5.95
77.91
11.12
4.15
94.97
37
©EPIC Consulting, LLC
Population Density Bands
The study’s database is summarized in Exhibit XVII for each form of coverage on the basis of each
zip code’s population density. The population density for each zip code was determined from U.S.
Census data. A map of the ten population density bands is presented in Appendix D.
Claim frequencies in Michigan for the BI, PD, and PPI coverages are relatively low because of the
nature of Michigan’s no-fault insurance law. With only three years of claim data for such lowfrequency coverages, it is difficult to draw definitive conclusions when the data is subdivided into ten
groups. Three years of data with relatively low claim frequencies, when subdivided into ten groups,
are subject to random fluctuations from year-to-year. Despite our concerns about the “thin” data, the
there are clear and discernable patterns in this study’s database. We observed:
1) the highest population density band has the highest claim frequency for the BI, PIP, UM and
collision;
2) of all the coverages, collision has the most consistent trend of increasing claim frequencies as
population density increases;
3) comprehensive claim frequencies are the highest in rural areas and tend to decrease as
population density increases, except in the densest Population Band 10;
4) PD and UM claim severities tend to decrease as population density increases;
5) PPI claim severities tend to increase as population density increases;
6) a “U-shaped” curve for PIP claim severities which were high in both the least populated and
most populated areas;
7) we found no strong relationship between population density and claim severities for BI,
comprehensive and collision.
We recognize that the loss ratios are not precisely identical across the population density bands.
Because of the treatment of “fixed” expenses in the ratemaking formula, identical loss ratios should
not be expected. But even more importantly, ratemaking done correctly is based on prospective losses
38
©EPIC Consulting, LLC
and expenses. The loss ratios in Exhibit XVII are a reflection of actual, historical claims. Even if
there were a way to determine perfectly accurate rates on a prospective basis, the actual historical
results will naturally vary from the expected results, because of random fluctuations in the claims
experience. This is especially true for low-frequency coverages, such as the liability coverages which
exist in Michigan.
With the exception of the PD and UM coverages, the remaining liability coverages (i.e., BI, PIP and
PPI) exhibit a remarkable consistency in loss ratios across the population density bands. The variation
in the PD loss ratios tends to be opposite the variation in the UM loss ratios.
The physical damage coverages of comprehensive and collision also indicate a great deal of
consistency in loss ratios across the population density bands.
Viewed from a historical perspective, rather than the prospective perspective necessary for
ratemaking, and recognizing that there will always be some variation in actual results from expected
results, we find the historical loss ratios across all population density bands to be remarkably
consistent. Consistent loss ratios across the population density bands are an indication that the rates
have been established in proportion to the claim losses which were incurred in each population density
band.
39
©EPIC Consulting, LLC
Exhibit XVII
PREMIUM AND CLAIM DATA BY POPULATION DENSITY BAND
ALL COVERAGES COMBINED
Capped Loss Ratio by Coverage
Population
Density
Earned
Losses
Loss
Bodily
Personal
Personal
Property
Injury
Property
Uninsured
Ratio
Injury
Damage
Protection
Insurance
Motorists
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
No Band
810,584,653
854,529,416
862,419,084
842,023,938
919,668,453
939,514,828
1,091,300,321
980,270,545
1,046,759,672
694,149,256
58,013,002
517,635,914
505,773,062
492,546,925
476,591,820
518,993,603
515,526,405
616,580,151
557,482,963
579,331,051
446,468,946
37,807,999
63.9%
59.2%
57.1%
56.6%
56.4%
54.9%
56.5%
56.9%
55.3%
64.3%
65.2%
33.6%
32.6%
32.7%
33.4%
30.3%
30.1%
31.8%
29.3%
29.5%
29.5%
30.4%
84.6%
74.6%
86.2%
94.0%
73.2%
74.1%
65.2%
60.1%
50.9%
37.1%
78.5%
54.1%
49.6%
46.8%
46.8%
46.2%
42.2%
44.5%
46.8%
45.5%
58.9%
52.5%
69.2%
66.7%
68.7%
72.1%
72.3%
72.4%
74.8%
76.1%
77.8%
67.6%
89.0%
24.2%
24.4%
20.5%
22.2%
19.3%
20.4%
27.0%
34.2%
30.0%
71.1%
36.9%
88.9%
74.1%
65.9%
59.3%
59.1%
54.9%
54.4%
57.6%
56.5%
81.3%
77.1%
69.4%
68.0%
67.1%
67.8%
68.1%
67.5%
69.1%
68.9%
67.0%
69.0%
77.4%
State
9,099,233,170
5,264,738,840
57.9%
31.3%
70.3%
47.9%
72.2%
28.7%
64.9%
68.2%
Band*
Premium
Incurred
Frequency by Coverage
Population
Personal
Personal
Density
Earned
Incurred
Loss
Bodily
Property
Injury
Property
Uninsured
Band*
Premium
Losses
Ratio
Injury
Damage
Protection
Insurance
Motorists
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
No Band
810,584,653
854,529,416
862,419,084
842,023,938
919,668,453
939,514,828
1,091,300,321
980,270,545
1,046,759,672
694,149,256
58,013,002
517,635,914
505,773,062
492,546,925
476,591,820
518,993,603
515,526,405
616,580,151
557,482,963
579,331,051
446,468,946
37,807,999
63.9%
59.2%
57.1%
56.6%
56.4%
54.9%
56.5%
56.9%
55.3%
64.3%
65.2%
0.0015
0.0016
0.0017
0.0018
0.0015
0.0017
0.0017
0.0016
0.0017
0.0023
0.0016
0.0031
0.0033
0.0039
0.0046
0.0045
0.0048
0.0055
0.0046
0.0048
0.0046
0.0041
0.0074
0.0073
0.0072
0.0077
0.0074
0.0078
0.0088
0.0091
0.0092
0.0152
0.0081
0.0068
0.0071
0.0071
0.0072
0.0070
0.0069
0.0066
0.0072
0.0076
0.0066
0.0082
0.0001
0.0001
0.0001
0.0002
0.0001
0.0002
0.0003
0.0003
0.0003
0.0011
0.0002
0.1340
0.1275
0.1242
0.1095
0.1149
0.1092
0.1009
0.0978
0.0924
0.1157
0.1193
0.0956
0.0982
0.1020
0.1073
0.1153
0.1219
0.1327
0.1347
0.1355
0.1692
0.1295
State
9,099,233,170
5,264,738,840
57.9%
0.0017
0.0043
0.0083
0.0070
0.0002
0.1127
0.1187
Severity by Coverage
Population
Personal
Personal
Density
Earned
Incurred
Loss
Bodily
Property
Injury
Property
Uninsured
Band*
Premium
Losses
Ratio
Injury
Damage
Protection
Insurance
Motorists
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
No Band
810,584,653
854,529,416
862,419,084
842,023,938
919,668,453
939,514,828
1,091,300,321
980,270,545
1,046,759,672
694,149,256
58,013,002
517,635,914
505,773,062
492,546,925
476,591,820
518,993,603
515,526,405
616,580,151
557,482,963
579,331,051
446,468,946
37,807,999
63.9%
59.2%
57.1%
56.6%
56.4%
54.9%
56.5%
56.9%
55.3%
64.3%
65.2%
18,039
18,390
17,813
16,987
18,092
17,541
18,908
18,045
18,280
17,120
17,302
1,967
1,680
1,688
1,630
1,300
1,299
1,092
1,176
1,015
1,010
1,568
10,608
10,123
9,653
9,051
9,295
8,341
8,475
8,909
9,183
10,298
10,729
1,357
1,299
1,363
1,426
1,467
1,560
1,821
1,757
1,813
2,433
1,634
23,313
23,505
20,159
19,417
19,415
16,749
16,267
16,102
15,128
15,541
0
889
782
718
689
674
696
808
891
980
1,956
843
2,309
2,335
2,315
2,271
2,280
2,300
2,389
2,273
2,294
2,560
2,329
State
9,099,233,170
5,264,738,840
57.9%
17,946
1,370
9,373
1,581
17,472
842
2,326
Pure Premium by Coverage
Population
Capped
Capped
Personal
Personal
Density
Earned
Incurred
Loss
Bodily
Property
Injury
Property
Uninsured
Band*
Premium
Losses
Ratio
Injury
Damage
Protection
Protection
Motorists
Comprehensive
Collision
1
2
3
4
5
6
7
8
9
10
No Band
810,584,653
854,529,416
862,419,084
842,023,938
919,668,453
939,514,828
1,091,300,321
980,270,545
1,046,759,672
694,149,256
58,013,002
517,635,914
505,773,062
492,546,925
476,591,820
518,993,603
515,526,405
616,580,151
557,482,963
579,331,051
446,468,946
37,807,999
63.9%
59.2%
57.1%
56.6%
56.4%
54.9%
56.5%
56.9%
55.3%
64.3%
65.2%
27.60
28.68
29.47
30.54
27.63
29.16
32.68
29.71
31.18
39.52
27.57
6.09
5.54
6.57
7.47
5.86
6.28
5.98
5.43
4.91
4.65
6.41
78.16
74.03
69.43
69.86
68.69
64.69
74.91
80.86
84.08
156.74
86.61
9.24
9.24
9.64
10.22
10.28
10.76
12.07
12.63
13.81
16.11
13.39
2.92
3.10
2.64
3.05
2.66
3.03
4.09
5.09
4.78
17.31
4.95
119.07
99.79
89.21
75.44
77.45
75.95
81.51
87.14
90.51
226.25
100.64
220.68
229.30
236.25
243.65
262.86
280.40
317.02
306.16
310.71
433.16
301.59
State
9,099,233,170
5,264,738,840
57.9%
30.07
5.95
77.91
11.12
4.15
94.97
276.13
*Population Density Band 1 has the least people per square mile and Band 10 has the most people per square mile.
40
©EPIC Consulting, LLC
Territories by Coverage
The loss data for each of the seven coverages were separately analyzed by zip code so as to determine
which areas within Michigan were most similar with respect to the risk of loss. To the extent possible,
data were adjusted for catastrophe and jumbo losses which potentially distorted either the claim
frequency or the claim severity for any year in the database. After adjustment for catastrophe losses,
the pure premiums for each coverage were adjusted for credibility using a commonly accepted
actuarial standard for full credibility. The fully-credible pure premiums for each coverage were then
grouped so that each group contained zip codes of similar risk. In other words, the zip codes were
grouped so that each group contained a similar risk of a BI loss. Then another grouping of the zip
codes was done so that each group contained a similar risk of a PD loss, then a grouping by PIP, and
etc.
The homogeneity of risk within each zip code group was measured by the statistical variance of the
pure premiums for each coverage within each group. The goal was to minimize the variance, or
increase the homogeneity, of the risk of loss within each group.
Because the claim frequencies for Michigan’s liability coverages (especially BI, PD, PPI and UM) are
so low, and because we had only three years of loss data available for analysis, we have opted not to
present the indicated territories in this report for BI, PD, PPI and UM. The results of the analysis for
BI, PD, PPI and UM are available upon request.
We have presented in Appendices E, F and G the indicated territories for the PIP, comprehensive and
collision coverages. Territory 1 represents the territory with the highest pure premium. The pure
premiums decrease as the territory number increases.
The three maps are significantly different for each coverage. The claim loss exposure varies
geographically, and this geographic variation is different for each coverage. The geographic variation
in losses arising from injury to persons (as represented by the PIP coverage) is not the same as the
geographic variation in losses arising from damage to cars (as represented by the comprehensive and
collision coverages).
Comprehensive Losses by Peril
Table 14 summarizes the claim frequencies, claim severities and pure premiums by cause of loss for
the comprehensive coverage. Glass losses and total theft losses, together constitute 46% of the total
41
©EPIC Consulting, LLC
comprehensive losses. While glass claims have a low average severity, they constitute two-thirds of
all comprehensive claims. Total theft claims, on the other hand, are relatively infrequent but they have
the highest average claim severity.
Table14 – Comprehensive by Cause of Loss
Peril
Frequency
% of Total
Severity
Ratio
to Total
Pure
Premium
% of Total
Fire
.0006
0.6%
$4,144
4.89
$2.65
2.9%
Wind/Hail
.0015
1.4%
1,661
1.96
2.49
2.7%
Vandalism
.0046
4.3%
857
1.01
3.97
4.3%
Total Theft
.0028
2.6%
5,792
6.84
16.47
17.9%
Partial Theft
.0023
2.1%
1,364
1.61
3.15
3.4%
Glass
.0739
67.8%
356
0.42
26.26
28.5%
Flood
.0001
0.1%
3,099
3.66
.22
0.2%
Animal Collision
.0004
0.4%
4,535
5.36
1.95
2.1%
All Other
.0226
20,8%
1,550
1.83
35.05
38.0%
Total
.1089
100.0%
$ 847
1.00
$92.21
100.0%
Appendices H and I show low, medium and high cost areas for total theft and glass losses.
Although not exhibited in this report, we found the following with respect to comprehensive coverage
losses.
a) Band 10, the most densely populated area, has less than 5% of the earned car years (i.e.,
exposure counts), yet has more than one-third of Michigan’s total theft incurred loss dollars
and more than one-third of the partial theft incurred loss dollars.
b) Wind and hail losses, and glass losses, appear to be more heavily concentrated in less densely
populated areas.
Degree of Competition
This study was not designed to provide an exhaustive analysis of the degree of competition which
exists in the Michigan auto insurance market. However, the data necessary to conduct this study of
the claim losses also provide at least a partial picture of the market’s competitiveness.
In the process of analyzing the geographic variation of claim losses within Michigan, we found a great
divergence in the rate territory definitions being used by insurers. Rating territories are the means by
42
©EPIC Consulting, LLC
which insurers measure and assess geographic risk. Divergence in the assessment of risk is a sign of a
competitive market. Divergence in the assessment of risk leads to a divergence of rates available in
the insurance market for insurance customers.
We found significant differences in the rates being charged by the insurers in the study and we found
the divergence in rates to be consistent across all areas within Michigan. We calculated the average
premium for each insurer in each of the ten population density bands. The calculations were made for
two compulsory coverages (i.e., BI and PIP) and two optional coverages (i.e., comprehensive and
collision).
The lowest average premium within each band was divided by the overall average premium for that
band to determine a ratio of the lowest premium to the average premium. We also calculated a ratio of
the highest premium to the average premium for each band and a ratio of the second-highest premium
to the average premium for each band. We chose to exhibit the second-highest premium because there
is a remarkable difference in this study’s database between the highest and second-highest premiums
for every coverage, in every population density band. If we had shown only the highest and lowest
premiums, some readers may have been misled into believing that the rates for individual insurers in
this study were evenly distributed throughout the entire range of rates available in the market.
The lowest, highest, and second-highest premium ratios are presented in the following four tables.
The “difference” is the spread of rates from the lowest to the second-highest rate. The complete range
of rates within each population density band is represented by the lowest to the highest rate. However,
if we had used the highest rate to determine the “difference”, some readers may have criticized us for
using the rates of a single insurer just to exaggerate the rate divergence which exists in all markets
throughout Michigan.
Table 15 – Ratio of Premiums to the Average – BI
Population Density Band
1
2
3
4
5
6
7
8
9
10
.90
.85
.83
.90
.86
.84
.87
.89
.94
.90
2 -Highest Premium
1.22
1.20
1.16
1.15
1.15
1.15
1.18
1.14
1.19
1.22
Highest Premium
2.00
1.99
1.89
1.75
1.63
1.57
1.56
1.53
1.62
1.47
Difference
.32
.35
.33
.25
.29
.31
.31
.25
.25
.32
Lowest Premium
nd
43
©EPIC Consulting, LLC
Table 16 – Ratio of Premiums to the Average – PIP
Population Density Band
Lowest Premium
nd
1
2
3
4
5
6
7
8
9
10
.78
.76
.77
.70
.72
.66
.73
.69
.74
.70
2 -Highest Premium
1.34
1.26
1.22
1.27
1.20
1.19
1.17
1.19
1.14
1.22
Highest Premium
2.72
2.60
2.54
2.38
2.34
2.34
2.22
2.20
2.24
1.75
Difference
.56
.50
.45
.57
.38
.53
.44
.50
.40
.52
Table 17 – Ratio of Premiums to the Average – Comprehensive
Population Density Band
Lowest Premium
nd
1
2
3
4
5
6
7
8
9
10
.79
.81
.83
.88
.85
.88
.88
.87
.89
.63
2 -Highest Premium
1.61
1.55
1.51
1.60
1.59
1.53
1.47
1.55
1.46
1.60
Highest Premium
2.91
3.13
3.05
3.32
3.10
3.09
3.01
3.03
3.06
2.25
Difference
.82
.74
.68
.72
.74
.65
.69
.68
.57
.97
Table 18 – Ratio of Premiums to the Average – Collision
Population Density Band
1
2
3
4
5
6
7
8
9
10
.83
.82
.81
.85
.84
.85
.88
.82
.89
.85
2 -Highest Premium
1.32
1.28
1.27
1.28
1.29
1.25
1.19
1.26
1.19
1.16
Highest Premium
2.94
2.93
2.82
2.70
2.47
2.35
2.12
2.23
2.14
1.77
Difference
.49
.46
.46
.43
.45
.40
.31
.44
.30
.31
Lowest Premium
nd
We found significant rate divergence in every population density band, for every coverage. We
interpret the spread of rates available to insurance customers as one indicator of a competitive market
throughout Michigan.
Conclusions
The study’s database includes a wealth of information concerning the nature of private passenger auto
insurance losses in Michigan. At the risk of oversimplifying, we found that:
a) claim frequencies and claim severities are significantly different for each of the coverages,
44
©EPIC Consulting, LLC
b) the claim losses vary significantly by geographical area and those geographical variations are
different for each of the coverages,
c) there is a great deal of difference in the rates being charged by insurers in all areas of
Michigan, and
d) the loss ratios are remarkably consistent across all geographic areas within Michigan and this
consistency exists for each coverage.
The variation in the nature of losses by coverage and geographic area make it virtually impossible to
directly compare private passenger auto losses from one insurer to the next. Each insurer’s losses will
be dependent upon where its insureds are concentrated geographically and which of the optional
coverages its insureds purchase.
45
©EPIC Consulting, LLC
APPENDICES
Appendix A
Page 1
Bodily
Injury
Frequency Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix A
Page 2
Bodily Injury
Frequency Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix A
Page 3
Property Damage
Frequency Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix A
Page 4
Property Damage
Frequency Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix A
Page 5
Personal Injury Protection
Frequency Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Personal
InjuryBands
Protection
Water/Freezing
Frequency
Appendix A
Page 6
Territories by Peril
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix A
Page 7
Personal Property Insurance
Frequency Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix A
Page 8
Fire/Lightning
Personal Property Insurance
Frequency
Territories byBands
Peril
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix A
Page 9
Uninsured Motorists
Frequency Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix A
Page 10
Uninsured Motorists
Frequency Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix A
Page 11
Comprehensive
Frequency Bands
Band
1
2
3
4
5
6
7
8
9
10
N
C Copyright, 2004, EPIC Consulting, LLC
O
28 July 2004
Appendix A
Page 12
Comprehensive
Frequency
Bands
Territories by
Peril
Band
1
2
3
4
5
6
7
8
9
10
N
C Copyright, 2004, EPIC Consulting, LLC
O
28 July 2004
Appendix A
Page 13
Collision
Frequency Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix A
Page 14
Collision
Frequency
Bands
Territories by
Peril
Band
1
2
3
4
5
6
7
8
9
10
N
C Copyright, 2004, EPIC Consulting, LLC
O
28 July 2004
Appendix B
Page 1
Bodily
Injury
Severity Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix B
Page 2
Bodily Injury
Severity Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix B
Page 3
Property Damage
Severity Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix B
Page 4
Property Damage
Severity Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix B
Page 5
Personal Injury Protection
Severity Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Personal
Injury Protection
Water/Freezing
Severity Bands
Appendix B
Page 6
Territories by Peril
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix B
Page 7
Personal Property Insurance
Severity Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix B
Page 8
Fire/Lightning
Severity Bands
Territories
by Peril
Personal Property Insurance
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix B
Page 9
Uninsured Motorists
Severity Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix B
Page 10
Uninsured Motorists
Severity Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix B
Page 11
Comprehensive
Severity Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix B
Page 12
Comprehensive
Severity Bands
Territories
by Peril
Band
1
2
3
4
5
6
7
8
9
10
N
C Copyright, 2004, EPIC Consulting, LLC
O
28 July 2004
Appendix B
Page 13
Collision
Severity Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix B
Page 14
Collision
Severity Bands
Territories
by Peril
Band
1
2
3
4
5
6
7
8
9
10
N
C Copyright, 2004, EPIC Consulting, LLC
O
28 July 2004
Appendix C
Page 1
Bodily
Injury
Pure Premium Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix C
Page 2
Bodily Injury
Pure Premium Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix C
Page 3
Property Damage
Pure Premium Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix C
Page 4
Property Damage
Pure Premium Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix C
Page 5
Personal Injury Protection
Pure Premium Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Personal
Injury Protection
Water/Freezing
Pure Premium Bands
Appendix C
Page 6
Territories by Peril
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix C
Page 7
Personal Property Insurance
Pure Premium Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix C
Page 8
Fire/Lightning
Pure
Premium
Territories
byBands
Peril
Personal Property Insurance
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix C
Page 9
Uninsured Motorists
Pure Premium Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix C
Page 10
Uninsured Motorists
Pure Premium Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix C
Page 11
Comprehensive
Pure Premium Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix C
Page 12
Comprehensive
Pure
Premium
Territories
byBands
Peril
Band
1
2
3
4
5
6
7
8
9
10
N
C Copyright, 2004, EPIC Consulting, LLC
O
28 July 2004
Appendix C
Page 13
Collision
Pure Premium Bands
Band
1
2
3
4
5
6
7
8
9
10
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix C
Page 14
Collision
Pure
Premium
Territories
byBands
Peril
Band
1
2
3
4
5
6
7
8
9
10
N
C Copyright, 2004, EPIC Consulting, LLC
O
28 July 2004
Appendix D
Page 1
Population Density Bands
Band
1
2
3
4
5
6
7
N
8
9
10
N/A
OC Copyright, 2004, EPIC Consulting, LLC
30 July 2004
Appendix D
Page 2
Population Density Bands
Territories
Band
1
2
3
4
5
6
7
8
N
9
10
N/A
C
O
Copyright, 2004, EPIC Consulting, LLC
30 July 2004
Appendix E
Page 1
Personal Injury Protection
Territories
Territory
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix E
Page 2
Personal Injury Protection
Territories
Territory
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
N
18
19
C
O
Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix F
Page 1
Comprehensive
Territories
Territory
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix F
Page 2
Comprehensive
Territories
Territory
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix G
Page 1
Collision
Territories
Territory
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
N
OC Copyright, 2004, EPIC Consulting, LLC
28 July 2004
Appendix G
Page 2
Collision
Territories
Territories
by Peril
Territory
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
N
C Copyright, 2004, EPIC Consulting, LLC
O
28 July 2004
Appendix H
Page 1
Cause of Loss
Theft
High
Medium
Low
N
OC Copyright, 2004, EPIC Consulting, LLC
14 July 2004
Appendix H
Page 2
Fire/Lightning
Cause of Loss
Theftby Peril
Territories
High
Medium
Low
N
OC Copyright, 2004, EPIC Consulting, LLC
14 July 2004
Appendix I
Page 1
Cause of Loss
Glass
N
High
Medium
Low
C
O
Copyright, 2004, EPIC Consulting, LLC
14 July 2004
Appendix I
Page 2
Cause of Loss
Glass
High
Medium
Low
N
OC Copyright, 2004, EPIC Consulting, LLC
14 July 2004