Statistical review of a motor insurance portfolio

Motor insurers in the United Kingdom are not subject to Government control over the rating structures they use or the levels of premiums they charge. The market is highly competitive, and each insurer therefore needs to make the best estimate he can of the premium required for each category of risk, to produce a given level of profit. He also needs to estimate the extent to which departures from such premium levels can be justified, for example in order to have a simple rating structure or to meet competition.The purpose of this note is to give some examples of the statistical tabulations being produced in one insurance office in the United Kingdom. The statistical system which has been developed covers many aspects of motor insurance management, but in this note we shall direct attention to just two, namely(i) continuous review of the variations in the claims experience from one risk category to another, as a guide to the relative premiums required for the different categories; and(ii) continuous review of the changing composition of the portfolio and of the movements in and out, to try to assess the extent to which gains and losses of business can be attributed to pricing differences, marketing strategies, etc.