State Farm sparks 'technological arms race'.As the largest U.S. automobile insurer, State Farm, prepares to roll out a new pricing system Noun 1. pricing system - a system for setting prices on goods or services system - a procedure or process for obtaining an objective; "they had to devise a system that did not depend on cooperation" for auto insurance, one industry observer said the industry is now engaged "in a technological arms race." Robert Hartwig, senior vice president and chief economist The Chief Economist is a single position job class having primary responsibility for the development, coordination, and production of economic and financial analysis. It is distinguished from the other economist positions by the broader scope of responsibility encompassing the of the Insurance Information Institute, said tiered pricing, while an extension of traditional underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. based on matching risk with price, requires two things to work: advanced computers and a wide array of available data, such as credit-based insurance scores. With both now widely available, insurers can create underwriting programs that "allow insurers to create more price points and allow the insurer to match the person to the price charged" under a wider variety of circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or , Hartwig said. "Now you've got hundreds, hundreds of thousands, even millions of potential price points," Hartwig stud, in comparison with the traditional preferred, standard and nonstandard non·stan·dard adj. 1. Varying from or not adhering to the standard: nonstandard lengths of board. 2. pricing of auto insurance. He said companies are racing to create state-of-the-art pricing systems and introduce them to the market in their quest for Verb 1. quest for - go in search of or hunt for; "pursue a hobby" quest after, go after, pursue look for, search, seek - try to locate or discover, or try to establish the existence of; "The police are searching for clues"; "They are searching for the an edge over competitors. Hartwig said moving to a more sophisticated underwriting system such as tiered pricing is "a huge investment" for any company, requiring consultants, training and technological improvements. "Ultimately, you don't have an option," Hartwig said. "If companies like Allstate and Progressive are doing it, if you're State Farm, you have to do it. They had to because if they didn't, they'd be adversely selected against." State Farm spokesman Dick Luedke said while the new system would be fully rolled out by the end of 2006, the company has implemented it in a handful of states so far. |
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