Comp raters- The carrier Algo trap- What is that?

[shawnmwalker]

I want to be very clear here on exactly what the Carrier Algorithm Trap is: When an agent uses the Comparative Rater to only help them identify and sell the best price they are simply using the tool to identify the weaknesses, or dare I say, mistakes, in the carrier pricing, as such, the agent is 100% DESTINED to build a book of business on risks, where the correct Written Premium was not calculated, causing the book to NEVER generate a Profit.

True statement or not?


For more info on that:

 

[fed up]

I don't think so at all. Carriers use their own metrics to price a product such as credit, # of people in the home, severity of claim in order for THAT company to show a profit based on loss history and experience. A customer with a low credit score because of outside factors is not necessarily a larger risk, nor is a household of 5 vs a household of 9. Pricing a policy from 1 company against another does not guarantee their business will always be a loss leader.

 

[shawnmwalker]

But if they get their metrics wrong (And they do, because they are not perfect), what other tool points out their errors better than a Comp Rater?

So is this an accurate statement:

From a carriers perspective, the Comparative rater does one thing: it shows the agent the weaknesses in the Carrier algorithms/ the product and then tempts the agent to exploit that weakness....

 

[shawnmwalker]

you better agree with me to some degree FEDUP or I will spend the afternoon convincing you, and I don't have time for that!

 

[fed up]

Sorry, I don't agree at all. If Progressive makes a profit every year, and Allstate, USAA, Geico, Nationwide, ect also make profits it is because of their Underwriting guidelines for that section of profitable customers, not a weakness in their algorithms. Al Gore may be a weakness and perhaps anything which includes his name but not Underwriting guidelines for each and every carrier.

 

[shawnmwalker]

Lets go nice and Slow:

Carriers don't always price things correctly. Some times they go, "Oh, Crap, we are way too competitive on Teen drivers, that was not supposed to happen!"

When that happens, agents see that on the comp rater and say, "DAAAAAANNNNNGGGG! I guess X carrier is dying to get more teens on the books because they got a price on the street that is BANGIN! And That's were daddy is going to send the teens, until they fix it and the rate stops me from flooding that all day long!"

If that is the case. The Carrier is saying, "Oh crap, we messed up the rate on that risk" and the agent using the comp rater is saying, "I know where to go on that risk now, at least until they fix it!"

If this scenario happens (AND IT DOES), then my first comment is correct, "When an agent uses the Comparative Rater to only help them identify and sell the best price they are using the tool to identify the weaknesses, or dare I say, mistakes, in the carrier pricing, as such, the agent is 100% DESTINED to build a book of business on risks, where the correct Written Premium was not calculated, causing the book to NEVER generate a Profit."

 

[fed up]

Who is to say that the higher priced premium company is wrong because they answer to their shareholders before they answer to their customers? A competitive price on teen drivers does not make pricing wrong. Cleaning out my wallet because of YOUR loss history in the same zip code is one of the real problems in our industry. It is always the option to present all premiums to the customer and help them choose what is best/right for them

 

[shawnmwalker]

Fed up, We clearly are not on the same page.

Product managers have and will mess up on the pricing. (I know many and they admit they miss the mark sometimes on some risks or their competition took rate and left them behind ot capture too much pf a risk, or, or, or.) When they do mess up, or find they are getting too much of.... The comp rater exacerbates their mistakes or a bad scenario because it shows agents their mistake or situation the carrier finds themselves in that they might otherwise not want to be in. And agents then go for it and sell more with them because it is ratedcompetitively. (For example)

If This statement were not true, then why do some carriers pull themselves off the rater on certain risks when they know they are too competitively priced. (Because they know they are too low. They cant get a profit on that segment and until it is fixed and filed with the DOI they pull themselves off the rater as a band-aid on the situation)

 

[marindependent]

I may be mistaken, but I think what you might be saying shawnwalker is that the rates that appear on the Raters and Carrier Sites are not the Correct Rates that should be charged? Or am I incorrect?

 

[shawnmwalker]

Correct. Because a product manager got something wrong in the algorithm. or a myriad of other reasons. Am I not saying that?