Abstract:
Automobile insurance rates are established by performing calculations for defining a single tier placement dependent upon a combination of mutually exclusive factors based on applicant data. The factors include a household driving record gradient, a stability gradient and an operator driving record gradient. In the case of a new policy, the factors also include a named insured driving experience gradient and a prior insurance gradient. Alternately, in the case of a renewal policy, the factors also include a household claims record gradient, a member relationship gradient and an operator claims record gradient. No single factor is the sole determinant for placement in a tier.

Description:
This application claims priority to U.S. Application Ser. No. 60/387,623 filed Jun. 11, 2002, entitled AUTOMOBILE UNDERWRITING ENGINE, which is incorporated herein by reference in its entirety. 
    
    
     BACKGROUND 
     The disclosures herein relate generally to establishing insurance rates for customers of a company, and more particularly to a system and method for establishing rates for a vehicle insurance policy. 
     Establishing criteria for setting insurance rates is very complex and requires the consideration of a number of factors. Various combinations of factors have been considered in the past. It is important that the factors used are able to produce reliable results and consistent results. With respect to vehicle insurance, a vehicle includes any device or structure for transporting persons or things, and may include self-propelled vehicles such as, for example, an automobile, a truck, a motorcycle or a boat. 
     Therefore, what is needed is a combination of factors that are consistently reliable in establishing fair rates for vehicle insurance for both new and renewal coverage, and more particularly, automobile insurance. 
     SUMMARY 
     One embodiment, accordingly, provides for establishing rates for a vehicle insurance policy. To this end, calculations are performed for establishing a single tier placement dependent upon a combination of mutually exclusive risk factors based on applicant data. The factors include determining a household driving record gradient, determining a stability gradient, and determining an operator driving record gradient. 
     Advantageously, no single factor is the sole determinant for placement in a tier because a unique combination of the factors determine tier placement. 
    
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
         FIG. 1  is a chart illustrating an embodiment of factors considered for a new policy tier placement. 
         FIG. 2  is a chart illustrating an embodiment of factors considered for a renewal policy tier placement. 
         FIG. 3  is a chart view illustrating an embodiment of gradients and characteristics for a household driving record factor. 
         FIG. 4  is a chart view illustrating an embodiment of gradients and characteristics for a named insured driving experience factor. 
         FIG. 5  is a chart view illustrating an embodiment of gradients and characteristics for a stability factor. 
         FIG. 6  is a chart view illustrating an embodiment of gradients and characteristics for a prior insurance factor. 
         FIG. 7  is a chart view illustrating an embodiment of gradients and characteristics for an operator driving record factor. 
         FIG. 8  is a chart view illustrating an embodiment of a profile comprised of various factors and a resultant tier placement for new coverage. 
         FIG. 9  is a chart view illustrating an embodiment of gradients and characteristics for a household claims record factor. 
         FIG. 10  is a chart view illustrating an embodiment of gradients and characteristics for a household driving record factor. 
         FIG. 11  is a chart view illustrating an embodiment of gradients and characteristics for a stability factor. 
         FIG. 12  is a chart view illustrating an embodiment of gradients and characteristics for a member relationship factor. 
         FIG. 13  is a chart view illustrating an embodiment of gradients and characteristics for an operator claims record factor. 
         FIG. 14  is a chart view illustrating an embodiment of gradients and characteristics for an operator driving record factor. 
         FIG. 15  is a chart view illustrating an embodiment of a profile comprised of various factors and a resultant tier placement for renewal coverage. 
         FIG. 16  is a schematic view illustrating an embodiment of a computer system for use in analyzing a member profile and providing a tier placement. 
         FIG. 17  is a schematic view illustrating various modes of communication with a membership organization for insurance coverage. 
     
    
    
     DETAILED DESCRIPTION 
     Referring now to  FIG. 1 , it is illustrated in a chart designated  100 , that tier placement considers factors for a new policy including a household driving record factor at  102 , a named insured driving experience factor at  104 , a stability factor at  106 , a prior insurance factor at  108  and an operator driving record at  110 . 
     The household driving record factor at  102  considers the combined driving records for all drivers in the household for example, for the past three years. This includes characteristics such as at-fault accidents and not-at-fault accidents. Major violations are also considered such as, for example, driving under the influence (DUI) and wreckless driving. Minor violations are also considered, such as, for example, moving violations. Other considerations include license status, i.e. active, revoked or suspended. Comprehensive claims are not considered, such as vandalism, etc. As a reference, a not-at-fault accident is where the insured party is less than 50% at fault. Several gradients, in one embodiment, five gradients, are used for the household driving record factor including clean, good, marginal, poor and unacceptable. 
     The named insured driving experience factor at  104  includes consideration of the characteristics such as the number of years of driving experience. If the named insured has 5 or more years of driving experience, the driver is considered experienced. If the named insured has less than for example 5 years of driving experience, the driver is considered inexperienced. Thus, the gradients may be experienced and inexperienced. 
     The stability factor at  106  includes characteristics such as a credit score which can be obtained from a credit reporting agency, and which is only used for example, for the first 2 years of coverage. Also included is whether there is one vehicle to be insured, or more than one vehicle to be insured. A further inquiry is made into whether there is a past history of cancellation of insurance for non-payment of an insurance premium. Last, in the case of military personnel, there is a consideration of whether the insured is an officer, a non-commissioned officer (NCO), an enlisted non-NCO, or an ex-dependent, i.e., a spouse or children of a former insured party. The gradients for the stability factor may be excellent, good, average, fair and acceptable. 
     The prior insurance factor at  108  looks at characteristics such as the type of prior insurance and whether the insured party was previously considered to be an assigned risk or not an assigned risk, and in addition, the number of days since the prior insurance lapsed. The gradients for the prior insurance factor may be good, marginal and poor. 
     The operator driving record factor at  110  is the same as the household driving record at  102  with the exception that the operator driving record factor considers only the driving record of the operator and not of the combined household. There are for example, four gradients for the operator driving record factor which may include good, marginal, poor and unacceptable. 
     Referring to  FIG. 2 , it is illustrated in a chart designated  200 , that tier placement considers factors for a renewal policy including a household claims record factor at  202 , a household driving record factor at  204 , a stability factor at  206 , a member relationship factor at  208 , an operator claims record factor at  210  and an operator driving record factor at  212 . 
     For a renewal policy, the household claims record factor at  202  includes characteristics such as any at-fault accidents or any not-at-fault accidents, for example, in the past three years, any at-fault accidents in years 4 and 5, and any at-fault accidents, for example, where nothing was paid out by the insurance carrier on behalf of the insured party. Also, comprehensive claims are considered. The combined claims record for all drivers in the household are considered. There may be six gradients used to determine the household claims record which may include clean, good, fair, marginal, poor and unacceptable. 
     In addition, for a renewal policy, the household driving record factor at  204  is considered and includes characteristics such as major violations, for example, DUI and wreckless driving, and also includes minor violations such as, for example, moving violations. The household driving record includes the combined driving records for all drivers in the household, for example, for the past three years. There may be six gradients used to determine the household driving record factor which may include clean, good, marginal, poor and unacceptable. 
     The stability factor at  206  includes the same criteria as required for the stability factor at  106 , described above, and has the same gradients. 
     The member relationship factor at  208  includes characteristics such as a consideration of the number of years of past membership, and whether or not the member has collateral coverage such as homeowners or rental insurance. There may be three gradients for the member relationship factor which may include excellent, good and average. 
     The operator claims record factor at  210  includes the same criteria as required for the household claims record at  202 , with the exception that only the claims record for the operator is considered and not the combined household. There may be six gradients for the operator claims record which may include clean, good, fair, marginal, poor and unacceptable. 
     The operator driving record factor at  212  is the same as the operator driving record at  110 , with the exception that there may be five gradients which may include clean, good, marginal, poor and unacceptable. 
     A risk may be acceptable in one of, for example, four tiers. The tiers are designated as  2 A,  3 A,  3 B and  4 A, and are discussed in detail below. The tier  2 A is considered the lowest risk and those who qualify are offered preferred insurance rates. The tiers  3 A and  3 B are considered a higher risk than  2 A and those who qualify are offered standard insurance rates. The tier  4 A is considered a higher risk than  3 A,  3 B and tier  4 A qualifiers are offered non-standard insurance rates. 
     Placement in a tier depends on a unique combination of risk factors. Each risk factor depends on a risk gradient, and each gradient depends on a unique combination of risk characteristics. 
     When establishing a tier for a new policy, the household driving record factor  102 ,  FIG. 3 , is considered to determine a gradient of clean, good, marginal, poor or unacceptable. For example, a household driving record for a single vehicle household qualifies for a gradient of good, at  102   a , where the applicant has the combination of characteristics including no major or minor violations, no at-fault and one not-at-fault accident, and an active license. 
     The named insured driving experience factor  104 ,  FIG. 4 , is considered to determine a gradient of experienced or inexperienced. For example, a driver qualifies for a gradient of experienced at  104   a , where the named insured has the characteristic of more than, for example, 5 years (60 months) of driving experience. 
     The stability factor  106 ,  FIG. 5 , is considered to determine a gradient of, for example, excellent, good, average, fair or acceptable. For example, the stability factor qualifies for a gradient of fair at  106   a  where the applicant has the combination of characteristics including a range 2 credit score, no prior cancellations for non-payment of an insurance premium, and is an enlisted military person having a single vehicle. 
     The prior insurance factor  108 ,  FIG. 6 , is considered to determine a gradient of, for example, good, marginal or poor. For example, the prior insurance factor qualifies for a gradient of poor at  108   a , where the applicant has the combination of characteristics including a prior assigned risk with an insignificant number of days lapsed since the prior insurance coverage. 
     The operator driving record factor  110 ,  FIG. 7 , is considered to determine a gradient of, for example, good, marginal, poor or unacceptable. For example, the operator driving record factor qualifies for a gradient of good at  110   a  where the applicant has the combination of characteristics including no major violations, 0-1 minor violations, no at-fault accidents, 0-1 not-at-fault accidents and an active license. Also, operator age may be considered when the operator driving record is marginal. In that case, an older, more experienced driver would have an advantage over a younger, less experienced driver. 
     Having considered characteristics and established gradients for each factor, a tier of  4 A is established on a table at  FIG. 8 , defined as profile number  1026 . The combination of gradients are, for example, good, experienced, fair, poor and good for the respective factors of household driving record, named insured driving experience, stability, prior insurance and operator driving record. Thus, this applicant is qualified for coverage at non-standard insurance rates. 
     When establishing a tier for a renewal policy, the household claims record factor  202 ,  FIG. 9 , is considered to determine a gradient of, for example, clean, good, fair, marginal, poor or unacceptable. For example, a household claims record for a single vehicle household qualifies for a gradient of fair, at  202   a , where the policy holder has the combination of characteristics of one at-fault accident, for example, in the past three years, one other loss such as a comprehensive claim in the past three years, and no at-fault accidents in, for example, years 4 and 5. 
     The household driving record factor  204 ,  FIG. 10 , is considered to determine a gradient of clean, good, marginal, poor or unacceptable. For example, a household driving record for a single vehicle household qualifies for a gradient of clean at  204   a , where the policy holder has the combination of characteristics including no major or minor violations in the past three years. It should be noted that for a renewal policy, accidents are not a consideration. 
     The stability factor  206 ,  FIG. 11 , is considered to determine a gradient of, for example, excellent, good, average, fair and acceptable. For example, the stability factor qualifies for a gradient of good at  206   a  where the policy holder has the combination of characteristics including past coverage with the present carrier for 0-18 months, for example, a range 1 credit score, no prior cancellations for non-payment of an insurance premium, and is an enlisted military person. The number of vehicles is not considered. 
     The member relationship factor  208 ,  FIG. 12 , is considered to determine a gradient of, for example, excellent, good or average. For example, the member relationship factor qualifies for a gradient of excellent at  208   a  where the policy holder has the combination of characteristics including, for example, 6-19 years of past membership and collateral coverage such as a homeowner policy with the current provider. 
     The operator claims record factor  210 ,  FIG. 13 , is considered to determine a gradient of for example, clean, good, fair, marginal, poor or unacceptable. For example, the operator claims record factor qualifies for a gradient of fair at  210   a  where the policy holder has the combination of characteristics including, for example, one at-fault accident in the past three years, one other loss in the past three years, such as a comprehensive claim, and no at-fault accidents in, for example, years 4 and 5. 
     The operator driving record factor  212 ,  FIG. 14 , is considered to determine a gradient of, for example, clean, good, marginal, poor or unacceptable. However, this gradient may not be applicable where, for example, the household driving record factor is clean, therefore, all operators for the household are clean. 
     Having considered characteristics and established gradients for each factor, a tier of  2 A is established on a table at  FIG. 15 , defined as profile number  1063 . The combination of gradients are, for example, fair, clean, good, excellent, fair and n/a (clean) for the respective factors of household claims record, household driving record, stability, member, relationship, operator claims record and operator driving record. Thus, this applicant is qualified for coverage at preferred insurance rates. The number of vehicles in a household can be a factor affecting tier placement. For example, two accidents in a three vehicle household can result in a higher tier placement than two accidents in a one vehicle household. This is because there are fewer accidents per exposure in the three vehicle household. 
     In one embodiment, a computer system  500 ,  FIG. 16 , may be used to establish a tier placement on a table based on a member profile. The computer system  500  includes a microprocessor  501 , which is connected to a bus  502 . Bus  502  serves as a connection between microprocessor  501  and other components of computer system  500 . An input device  503  is coupled to microprocessor  501  to provide input to microprocessor  501 . Examples of input devices include keyboards, touchscreens, and pointing devices such as mouses, trackballs and trackpads. Programs and data are stored on a mass storage device  504 , which is coupled to microprocessor  501 . Mass storage devices include such devices as hard disks, optical disks, magneto-optical drives, floppy drives and the like. Computer system  500  further includes a display  505 , which is coupled to microprocessor  501  by a video controller  506 . A system memory  507  is coupled to microprocessor  501  to provide the microprocessor with fast storage to facilitate execution of computer programs by microprocessor  501 . It should be understood that other busses and intermediate circuits can be deployed between the components described above and microprocessor  501  to facilitate interconnection between the components and the microprocessor. 
     Such insurance coverage, discussed above, may be offered by a membership organization  600 ,  FIG. 17 , for the benefit of members. A member may access the organization for rates by several modes of communication including, but not limited to, Internet or Intranet  602 , phone  604 , fax  606 , in-person  608 , mail  610  or wireless  612 . 
     Although illustrative embodiments have been shown and described, a wide range of modification, change and substitution is contemplated in the foregoing disclosure and in some instances, some features of the embodiments may be employed without a corresponding use of other features. Accordingly, it is appropriate that the appended claims be construed broadly and in a manner consistent with the scope of the embodiments disclosed herein.