Writinq for differences: multilayered underwriting is a tremendous advantage to agents, insurers and policyholders.

For years, insurers have been underwriting personal auto accounts as though all drivers in the household were like peas in a pod. Characteristics of one driver could dramatically influence the underwriting of the entire policy. The simple addition of a new driver, for example, could quickly turn a top-tier account into a less-desirable one.

While underwriters recognized that this broad-brush approach to personal auto underwriting was not ideal, there was little they could do about it. Personal auto had to be underwritten as a commodity to keep costs down and rates competitive. Applications had to be easy for agents to complete and require a minimum of variables and additional records so the agent could submit them quickly and the insurer could provide a fast, reasonably accurate quote.

Now to debunk two myths: that fine-tuned, multidimensional underwriting isn't practical for personal auto today and that all peas in the same pod are identical.

First, the insurance issue. Today, sophisticated technology is being combined with state-of-the-art statistical techniques to allow insurers to look at data and predict losses in ways we never could before. Computers can do accurate statistical modeling to determine the key drivers of loss, then apply that information in multiple dimensions to arrive at highly individualized conclusions. Insurers are considering many more rating factors and combining them in different ways to get a highly customized rating for each driver. When an insurer increases the rating tiers in its class plans from a half dozen to 50, it becomes possible, for example, to overlay an insurance score with the age of the driver, the driving record, and many other factors, then derive better predictive information and pricing. An excellent insurance score may mean one thing for a 20-year-old driver and quite another for a 70-year-old.

This advance has been enabled by technology. The sophisticated, multilayered underwriting that insurers are just starting to use was not possible rive years ago.

Multilayered underwriting is an advantage to agents, insurers and policyholders on three fronts: acquisition, retention and profitability. In acquiring business, it's important to keep down the amount of required information--but not at the expense of providing an accurate and complete picture of the insured. Multidimensional underwriting takes full advantage of information collected on a standard ACORD form and from standard reporting groups by combining, slicing and dicing it to get a clear picture of each vehicle and its driver. The result is fast, accurate underwriting without extra work for the agent or delay for the applicant. Another advantage is that insurers also tan provide a market for more difficult or unusual business, since increased underwriting accuracy allows them to create classes for virtually any risk.

Business acquisition is expensive for carriers and especially for agents; it usually takes agents about three years for an account to become profitable. Thus, there's strong value in long-term retention. Multidimensional underwriting aims at keeping an account for life. Some insurers may balk at covering beginner drivers, so when a teenager gets a driver's license, the family must get insurance from another carrier or even agent. Multidimensional underwriting enables insurers to write teenage drivers without underpricing or overpricing the entire family.

At the other end of the scale and where permissible, insurers may, at times, avoid writing older drivers and win look for opportunities to non-renew a couple when one spouse reaches a predetermined cutoff age. Sophisticated underwriting can price each driver accurately and independently, and allow both to remain on one policy.

Enhanced pricing accuracy is a major benefit of multidimensional underwriting. That means insurers are less likely to lose an account by pricing it higher than it needs to be, and less likely for the insurer to lose money and the agent's book profitability to be hurt by pricing an account too low to cover losses. It means that a driver who has an accident gradually will pay less due to that accident as time passes. It also means that rates reflecting age--like the aging process itself--will increase in small, one-year increments rather than large jumps every half-decade or so. These combine to increase profitability for insurers and agents.

Returning to peas, the pod myth is easily debunked by simple observation. When you open them, some pods contain large peas, others hold tiny ones, but most contain a variety of sizes. Just like an auto account.

Multidimensional underwriting recognizes that people are not all alike. It treats customers as individuals, not commodities. Given consumer demands and today's technology, this is the way personal auto increasingly will be written.

Judy Blades, a Best's Review columnist, is executive senior vice president, property-casualty, at Hartford Financial Services Group. She can be reached at [e-mail].