Helping Insurers Price Their Products

Pricing insurance is difficult. Unlike most businesses, an insurance company can't set its prices based on known costs for production and distribution. Instead, an insurer needs to project the costs of future claims by examining historical data. The process is reliable only when the insurer uses a sufficient amount of accurate data.

That's where ISO comes in.

Every year, ISO gathers information from insurance companies on hundreds of millions of policies — including the premiums the companies collect and the losses they pay.

We submit summaries of that information to insurance regulators — as required by law — to help the regulators evaluate the price of insurance in each state. We also use the information in the ISO database to prepare products and services that help insurers compete in the marketplace. And we provide a wealth of related products and services, including standardized policy language, rating and underwriting rules, and site surveys of individual properties.

As in all forms of statistical analysis, a large and consistent data sample allows more accurate predictions than a smaller sample. With ISO's broad aggregate database, predicting losses should be — and usually is — more accurate than with the data of any single insurance company. In fact, virtually no insurer has enough loss experience for all aspects of ratemaking in any line of insurance ISO serves.

ISO focuses on developing information that helps participating insurers make informed, intelligent, and independent decisions about the premiums they charge and the policies they sell. Insurers may use any ISO product or service as supplied — or they may modify it or not use it, as they see fit.

ISO's huge and flexible database provides the information insurers and regulators need for many functions. ISO's technically sophisticated products help insurers and their agents compete vigorously. And ISO's economies of scale and efficiencies of operation help the industry keep expenses under control. So, ISO's activities benefit all participants in the insurance marketplace — insurers, agents, regulators, and consumers.

For more information . . .
. . . about ISO's products and services, try our Product Finder. To ask a question, make a comment, or request service, contact ISO. You can also call us at 1-800-888-4476.