Even more predictable: ongoing underwriting innovations are improving risk assessment and agent-underwriter relationships.

In an industry often seen as lacking the spark of new ideas, leading insurance companies are moving rapidly to introduce innovative changes to traditional underwriting. Insurers began introducing new and different underwriting variables about a decade ago, following centuries of relying on a base rate, an account's loss history and a few pricing tiers.

First came insurance scores. Then insurers built on that approach using sophisticated technology and algorithms, plus strategic information and granular, multivariate pricing models. The result is greater precision in assessing individual risk.

When first introduced for personal auto policies several years ago, multivariate pricing took the industry by storm. It put the glamour back in personal lines and ushered in a new era of management principles. By bringing in more factors to evaluate an account, insurers could improve their accuracy in predicting losses and pricing individual accounts. Today carriers are beginning to apply a similar approach to evaluating and pricing commercial auto risks.

Multivariate products have major advantages for commercial auto coverage where loss frequency and severity have many predictable characteristics. Moving beyond traditional underwriting of total number of vehicles and drivers' motor vehicle records, insurers can capture granular information on vehicle operators and on the specific fleet composition--for example, vehicle value, use and gross weight--to price their products more precisely and enhance their competitiveness.

Predictive modeling benefits insurers, agents and policyholders, bringing insurers greater comfort when writing a broader range of accounts. Carriers can pinpoint segments experiencing rapid loss cost inflation and be surgical in pricing changes. With more knowledge, individual carriers will be less inclined to respond to irrational market pressures, which should help limit industry volatility.

For agents, this new generation of products will reduce a carrier's need to manually underwrite routine submissions, so agents receive a better quote faster.

Multivariate underwriting can give commercial policyholders greater confidence that insurers are measuring their true individual risk profile, bringing lower premiums as higher premiums are attached to higher exposure classes or risks. Regulators tend to look favorably on multivariate underwriting as a fair and fact-based approach to providing insurance that promotes a healthy and competitive environment.

Predictive modeling also may lead to changes in the agency-carrier relationship since agents are less able to rely on the historical "sweet spot" of a carrier in anticipating price or acceptance of the risk. To satisfy customer needs, agents must stay close to carriers' product developments and regularly seek quotes from the carriers they represent. Broadened risk appetite and competitive pricing could allow an agent to place an entire commercial account--auto, business owners' policy, workers' compensation and management liability--with a single carrier.

Finally, agents will find that predictive modeling fits well with good, easy-to-use submission software, delivering a reliable and accurate quote more quickly and further cementing relationships with certain carriers.

Multivariate underwriting already has improved predictability for personal auto and likely will do the same for commercial auto. Once that happens, commercial property or workers' compensation shouldn't be too far behind.