Commercial insurance scoring system and method

A method for creating a statistical model that generates a score representative of the profitability of an insurance policy for at least one of a new policyholder and an existing policyholder, comprising the steps of gathering historical policyholder data, including loss and premium data, identifying external data sources having a plurality of external variables, each external variable having a value, applying actuarial transformation to the policyholder data to generate working data, calculating a loss ratio for each policyholder in the database based on the working data, calculating a cumulative loss ratio for a defined group of policyholders in the database, performing a statistical analysis that investigates the relationship of each external variable and the cumulative loss ratio for the defined group to identify external variables that are predictive of the profitability of the insurance policy, and utilizing the predictive external variables identified in the previous step to develop a statistical model that generates a score predictive of the profitability of the insurance policy.

A system for predicting the profitability of an insurance policy comprising a database for storing policyholder data including premium and loss data, means for processing data from external data sources having a plurality of external variables to be used in predicting the profitability of the insurance policy, means for evaluating the external variables against the policyholder data to identify the external variables predictive of an insurance policy's profitability and means for creating a statistical model based on the external predictive variables that generates a score representative of the profitability of the insurance policy.

A system for creating a statistical model that generates a score representative of the profitability of an insurance policy for at least one of a new policyholder and an existing policyholder comprising a database of policyholder data, a means for accessing external data sources having multiple external variables, predictive means for sorting through the external variables to identify individual external variables that are predictive of the profitability the insurance policy and means for performing a statistical method on the external predictive variables to generate a coefficient for each external predictive variable, each coefficient representing the contribution of each external predictive variable to the score generated by the statistical model.

A method of performing risk-based pricing of an insurance policy comprising the steps of receiving a request for a price on an insurance policy, and evaluating the risk associated with issuing the insurance policy based on a profitability score derived from a statistical model generated with historical policyholder premium and loss data and external predictive variables identified from external data sources independent of internal policy holder data of an insurance company issuing the insurance policy.

A system for performing risk-based pricing of an insurance policy comprising means for receiving a request for a price on an insurance policy and means for generating a profitability score derived from a statistical model generated with external variables identified from external data sources independent of internal policy holder data of an insurance company issuing the insurance policy.