We are pleased to introduce a new Homeowner rating approach for our Ohio business. This approach uses rating factors derived from a state of the art multivariate statistical technique. This new practice will ensure insureds are charged a policy premium consistent with their own risk characteristics. What does this mean to you? Over time, multivariate rating produces a more profitable book of business for both your agency and Frankenmuth Insurance.
Program Highlights:
Ø Effective January 1, 2014 all Homeowner policy forms will be written and renewed into the new multivariate program.
Ø Territory assignments are based on zip code.
Ø iBIS system entry and output changes will be minor.
Ø Loss History Discount is changed to minimize the impact of wind/hail and CAT losses.
Ø Minimum mandatory wind/hail deductible of $2,000 will apply on all policies. The wind/hail deductible must be higher than the all peril deductible and the insured can select a higher wind/hail deductible for an additional premium discount. A variety of percentage and flat dollar deductibles are available.
Ø Pay plan discounts are available for annual, semi-annual, and quarterly direct bill, EFT, or continuous credit card. To assist entry, a billing screen will be added to the quick entry mode.
Ø Improved policy declaration pages reflecting the word “Discount” in the Premium Adjustment section for any discount being provided on the policy. All policyholders will have better recognition of the discounts which are being applied to their policy.
Ø Display of premium, credits and discounts on printable applications, declarations pages, and policy downloads will no longer list the associated percentages and premium amounts.
What does this mean for you – our agency partners?
Ø As with any significant class plan change, policyholder premium disruptions may occur. While any disruption is difficult to manage, it is important for us to get the right price for the given risk.
Ø We understand the importance of stable renewal pricing because retention is critical to our mutual success. We will have a Renewal Premium Cap (RPC) to manage the swings in premium. This RPC will be set at 25%, limiting any renewal policy premium increase to 25%, with the exception of any renewal inflationary Coverage “A” change made to the policy. This cap will assist us in having a single platform so all new and renewal business will be converted to the multivariate program. Also, it will assist you in retaining more of your policyholders.
Ø Your upcoming Agency Renewal Reports have been modified to reflect these changes. These reports are a useful tool to help you stay ahead of policy renewals and to be prepared for any policy renewals which are experiencing a larger than expected premium increase.
As always, should you have any questions, comments or concerns, please don’t hesitate to contact your Personal Lines Field Manager, Randy Pillen, your Personal Lines Underwriter, or me.
Thanks for your loyalty and support of Frankenmuth Insurance.
Frequently Asked Questions
The following are Frequently Asked Questions related to the implementation of our Multi-variate Home program:
1) Has multivariate rating changed Frankenmuth’s appetite for homeowner business?
ANSWER: No. You will continue to find Frankenmuth Insurance more competitive on those accounts with high insurance scores, low losses, higher deductible options, etc.
2) What attributes is Frankenmuth Insurance using for its Multivariate Homeowners Rating?
ANSWER: Frankenmuth Insurance is using all of the same attributes that we currently were using, in addition to a few others. Most of the previous attributes have been expanded and improved upon, while adding a few new attributes such as Loyalty. A complete list of the attributes being used can be found in the rule and rate manual.
3) Is there a rate increase included with the implementation of Ohio Homeowner Multivariate on January 1st?
ANSWER: No. Our last rate adjustment was June 1, 2013. As with any multivariate product launch, some policies may experience a higher increase while others may see a decrease in policy premium. This depends upon the policy risk characteristics. As a result, we will be using a Renewal Premium Cap.
4) Will Frankenmuth Insurance use a Renewal Premium Cap with Multivariate?
ANSWER: Yes. We will use a Renewal Premium Cap to mitigate policy premium swings. Renewals will be monitored and the caps will be adjusted as deemed necessary to ensure a profitable book of business.
5) Why does our Agency Renewal Report show the renewal premium hitting the Renewal Premium Cap, yet the estimated renewal premium appears to be higher than one would expect?
ANSWER: The Renewal Premium Cap only applies to certain coverages, with the biggest being the base premium. After the Renewal Premium Cap has been applied to all coverages, this could impact the overall policy premium. A minimum premium will prevail even if a Renewal Premium Cap is applied.
