Fast Track Monitoring System and Fast Track Plus™

Fast Track Monitoring System (Fast Track) reports are prepared quarterly by the Independent Statistical Service, Inc. (ISS), Insurance Services Office, Inc. (ISO), and National Independent Statistical Service (NISS). These are statistical reports reflecting multi-year trends in Private Passenger Automobile and Homeowners insurance experience. Approximately 50 of the largest companies (fewer for any given state) representing about 70 and 50 percent of the nationwide Personal Automobile and Homeowners Premium volume, respectively, participate in this voluntary report. Contained in Fast Track generally are Exposure, Paid Loss, and Paid Claim data, from which claim frequency, average loss (severity) and loss cost (pure Premium) experience is generated. Also included are Earned Premium and Incurred Losses used to develop loss ratio information.

Automobile insurance data are reported by major coverage; the frequency, average loss and loss cost data are presented for bodily injury liability, property damage liability, all comprehensive, all collision, and personal injury protection, if applicable, while the loss ratio reports provide all liability coverages combined, all comprehensive and all collision. The Homeowners insurance data for frequency, severity and loss cost are shown by policy form, while the loss ratio report combines all Homeowners forms. The Paid Loss data in the frequency, average loss, and loss cost reports do not include any loss adjustment expenses; however, the loss ratio data, which are generally retrieved from the Annual Statement (Statutory Page 14), do include these expenses.

The sample of companies reporting Paid Loss and Exposure data is not necessarily the same as companies reporting Incurred Loss and Earned Premium data. Hence, it is inappropriate to combine the two reports in an attempt to develop average Premium figures.

The purpose of Fast Track is to monitor trends over time, as it provides a good indication of how claiming and loss patterns are increasing, decreasing, or remaining stable. Due to the difference in the way certain data elements are defined by companies and variations in what is included by coverage, Fast Track should not be used for benchmarking purposes. (i.e., One company may report claim count on an occurrence basis, while another reports by claimant, or one company may include the effects of salvage and subrogation, while another does not.) Consistency in the chosen reporting methodology is stressed to all reporting companies to allow for comparable quarterly and yearly trend analysis in each report.

Fast Track Plus™ Product Features

The Independent Statistical Service’s Fast Track Plus™ product provides individual quarter Fast Track results as well as rolling four-quarter yearly totals for Private Passenger Automobile and Homeowners  data. All information is provided on an excel platform to provide maximum flexibility. Additional information provided in the Fast Track Plus™ product include exponential and straight line of best fit and R-Square calculations based on one, two, three and four year trends for claim cost, claim frequency and pure Premium data. Fast Track Plus™ includes access to aggregated input data that enables easy downloading to internal spreadsheets. Other features of the Fast Track Plus™ product are the easy to read graphs that compare individual state trends to countrywide figures and a quarterly analysis of the data.

Linear Trend

Linear trend fits the data points in the analysis to a straight line. It assumes a constant absolute, or dollar, change over time. Fast Track Plus™ calculates the linear trend by taking the total amount of change for the desired time period and dividing it by the base (starting) point plus half of the change over the period. This calculates the linear trend over the entire period. It then divides this trend by the number of years used in the calculation to convert to an annual trend. The program uses four points of data for the one year trend, eight points for the two year, twelve points for the three year, and sixteen points for the four year trend. The linear trend check calculates the average amount of change per quarter and multiplies this change by four to determine the annual change, then divides the average annual change by the average level of the variable over the time period.

Each method calculates the same linear trend.

Exponential Trend

Exponential trend fits the data points in the analysis to an exponential curve. It assumes a constant percentage change over time. Fast Track Plus™ calculates the exponential trend by first calculating the quarterly exponential change over the given time period, and second, raising this trend (plus 1.00) to the fourth power, then subtracting one (1.00), to convert to an annual trend. It uses the same number of points as the linear trend to calculate each of the one, two, three, and four year trends.

R-Square

Starting in 2007 Fast Track Plus™ began to include R-square, the coefficient of determination, or “goodness of fit”, a measure of how well the regression line fits the data. Essentially, it explains how close the data points are to the line. R-Square is provided for both the linear and exponential trends.

Regions

Private Passenger Automobile and Homeowners data is available by region (both pre-defined and customized regions are available). There are thirteen pre-defined regions. Each region reflects the experience of all the states (on a combined basis) in that region. For Automobile, regions include all coverages for the included states regardless of the no-fault laws of the individual states. Fast Track Plus™ also offers the option to create a customized region consisting of any subset of states.

Quarterly Analysis

In addition to the above mentioned features, ISS offers a quarterly in depth examination of emerging trends and the reasons underlying these changes in an analysis provided by well respected Pinnacle Actuarial Resources, Inc.

Access to Underlying Data

Starting in 2007, access was provided to aggregated input data that enables easy downloading to internal spreadsheets for your internal use.

Data and Calculations

Earned Years, No. of Paid Claims, No. of Claims Arising (for bodily injury and personal injury protection coverages only), and Paid Losses have been generated by the total accumulation of data from companies that report to the three entities collecting this data (ISS, ISO, NISS). We usually interpret Earned Years to be the number of insured vehicles or the number of insured “homes”. Paid Claims represent those claims for which an amount has been paid, although claims are not necessarily closed. Arising claims represent those that are open or reported, even though no amount has necessarily been paid. Paid Losses represent the dollar amount paid for a specific claim.

Paid Claim Frequency (Number of Paid Claims per 100 insured vehicles/homes)

The Paid Claim Frequency column is calculated by taking the number of Paid Claims, for each individual quarter, and dividing by the Earned Years, for that same quarter, and multiplying by 100. We multiply by 100 so that the result is more easily reported and interpreted.

Percent Change for Paid Claim Frequency

The next column, Percent Change from Quarter of the Prior Year for Paid Claim Frequency, is calculated by taking the ratio of the same quarter of two consecutive years, then multiplying by 100 (to get the percent). There will be slight discrepancies in the final percent change from the Fast Track report and your own calculations due to rounding that occurred in the Paid Claim Frequency column.

Average Loss (Claim Severity or Average Claim Cost)

Our next column is the Average Loss. This column is calculated by taking the Paid Losses and dividing by the Paid Claims. The Percent Change, for the average loss, From Quarter of Prior Year is calculated the same way as the Percent Change for the Paid Claim Frequency. Again, be aware of rounding differences.

Pure Premium (Paid Loss per insured vehicle/home)

The Pure Premium column is calculated by taking the Paid Losses and dividing by the Earned Years. Again, allow for rounding differences.

Arising Claim Frequency (Number of Arising Claims per 100 insured vehicles—Automobile only)

The Arising Claim Frequency column is obtained by taking the Number of Claims Arising and dividing by the Earned Years. As with the Paid Claim Frequency, we must again multiply by 100 to get the answer in more readable decimal form, e.g., 1.49.

Percent Changes for Pure Premium and Arising Claim Frequency

Percent Changes for the Pure Premium and Arising Claim Frequency columns are attained the same way as the percent changes for the Paid Claim Frequency column and the Average Loss Column.

Multi State

Multi-state is the term used to describe the combined Homeowners data from all states.

Multi-state is also the term used for Private Passenger Automobile combined reports. The states included in the combined reports are different depending on the coverage. The specific inclusions and exclusions are explained below:

• Bodily Injury Multi state excludes data from Colorado, District of Columbia, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, Puerto Rico, and Utah
• Personal Injury Protection Multi state includes data from Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New York, North Dakota, and Utah

For more information, contact us!