Prediction of Automobile Claims by Psychological Methods. A Case Study in Automobile Insurance

Abstract

An eight year old program in which accidental risk of underage males is predicted by means of psychological measurement and premiums and limits varied accordingly is described. Data on accident rate, cost and seriousness of injury are presented for six groups of underage males whose risk was predicted and for two groups of adult (lA) drivers. Related data on non-vehicular accident rate and intra-family accident rates are presented. It is suggested that perhaps attitudes are both pervasive and persistent enough that they would constitute a workable base for underwriting or rating a variety of insurance. Casualty underwriters have progressively moved away from the practice of spreading risk over a broad heterogeneous base toward a policy of spreading it over more narrowly defined homogeneous groupings. Age, sex, marital status, zone, vehicle characteristics, prior loss experience and driver training are among the commonly used bases for establishing rate groupings. Combinations of these rating factors are frequently used, resulting in virtually hundreds of sub-groups of insureds and an extremely complicated rating structure. Recently Grinnell Mutual Reinsurance Company has moved in a direction reversing this trend. If successful, this approach could result in a single rating variable. GMRC has taken the position that the attitudes and personality traits of an applicant importantly influence his behavior (e.g. how he drives) and consequently have a direct causal relationship Charles F. Haner, Ph.D., is Austin Professor of psychology at Grinnell College. He is research consultant to Maytag Company and Grinnell Reinsurance Company. Dr. Haner is Past President of Iowa Psychological Association. This paper was presented at the 1967 Annual NIeeting of A.R.I.A. to the risk he represents. By assessing these attitudes through psychological testing devices, accident susceptibility can be predicted and applicants can be placed at various risk levels. If this proves out, only the risk level of the applicant and the valuation of the coverage would need enter into determination of premium. This paper will briefly describe GMRC's Youthful Driver Program, the first and quite successful step in testing out this concept, will present the results of a recently completed study which bears importantly on the company's basic concept and finally will suggest additional topics under investigation or worthy of investigation. The Youthful Driver Program became operational at GMRC in September 1959, eight years ago. The rationale of the program was as follows: 1. The driver is the most important variable influencing both the frequency and severity of automobile accidents.The road, the vehicle and the weather are minor contributing factors to both frequency and severity. 2. The attitude and personality of the driver play a much more important role