on perpetual appreciation in either equity or bonds has fallen into disfavor.
Figure 3: 2002 Personal Lines Combined Ratio
2002 Personal Lines Combined Ratio
Total Combined Ratio: 104.2
LOSS & LAE RATIO U/W EXP ONLY RATIO
EXP RATIO (excluding U/W)
Source: Best’s Aggregates & Averages 2003 and Celent estimates
Improvement in underwriting profitability can result from improvement in any, or all, of the parts of the combined ratio:
Lowering expenses—for underwriting only, or for all expenses
Reducing losses—choose risks with lower probability of incurring
Increasing premiums—through raising rates and/or selling more poli- cies
Improving the premium/risk relationship—e.g., reducing premium per policy a bit, and reducing loss per policy even more
Subsequent sections in this white paper will describe how the four underwriting technologies make a positive impact on each of the combined ratio elements.
© 2004, Celent Communications. Authorized reproduction permitted.