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Use of predictive modeling by property/casualty insurers up: Survey

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Property/casualty insurers have increased their use of predictive modeling in most lines of business over the last year, while personal lines insurers are using modeling more than commercial insurers, according to the results of a new survey from Towers Watson & Co.

Commercial lines insurers “have been slower to adopt modeling” than personal lines insurer, according to Towers Watson’s fifth annual “Predictive Modeling Survey” released Thursday, with only 33% of general liability and 32% of commercial property insurers doing so. But more firms plan to introduce the use of modeling into their businesses, some 60% of commercial auto insurers and 53% of commercial property insurers said in the survey.

Commercial insurers tend to focus more on external risk-specific variables and socio-demographic data, while personal lines insurers stress variable interactions to strengthen their models, Towers Watson said in a statement.

Another key finding was that large insurers are more active in applying predictive modeling analytics to claim applications, and few small insurers have plans for claim-related applications

“Respondents are really tailoring their programs to focus on specific market realities,” said Towers Watson senior consultant Klayton Southwood in the statement.

The survey polled 59 U.S. P/C insurance executives. Respondents were evenly divided between midsize and large P/C insurers as measured by 2012 annual direct written premium, with each representing a 39% share of the total number of respondents, the company said in its statement. Smaller companies made up the remainder.

The survey is available here.