White Paper

More Than Just Data: Motor Vehicle Records as Lifestyle Indicators for Life Insurers

Adverse driving history is just the beginning. LexisNexis® research shows that motor vehicle records are predictive of lifestyle risk.

June 2012

Risk Solutions Insurance

Executive Summary In a study of more than 7.4 million motor vehicle records (MVRs), LexisNexis and RGA Reinsurance Company found that MVRs are a predictive data source that can indicate an individual’s all-cause mortality. Notably, we found that: • I ndividuals with major violations, such as alcohol-related infractions and excess speeding, have all-cause mortality that is 70 percent higher than individuals who do not. •T  he presence of six or more driving violations on an MVR elevates an individual’s all-cause mortality by 80 percent. • I ndividuals with a high number of major driving violations represent the worst risks. Analysis shows that MVRs offer positive protective value across a wide spectrum of ages and genders in life underwriting. MVRs can enable life insurers to price policies more accurately, improve risk posture and drive efficiency.

Introduction Increasingly, insurers want to know about an individual’s lifestyle risk; however, the insights drawn from social-networking and consumermarketing data are vague, at best. There is growing interest in reports that go beyond the data on the page and instead, enable insurers to predict other risks. Based on research conducted by LexisNexis and RGA, findings suggest that MVRs offer more than a record of driving behavior—they are predictive of an individual’s all-cause mortality.2 MVRs are often ordered for larger face amounts; below a particular policy value, the insurer’s underwriting requirements may not require an MVR. For instance, a 45-year old male seeking a $250,000 policy may not appear to live a risky lifestyle and, based on medical and financial reports, may even qualify as a preferred risk. Yet, according to our research, men between the ages of 41-50 with multiple major violations on their MVRs have an all-mortality rate that is nearly twice that of a driver with a clean record. Based on this study, MVRs are a suitable indicator of all-cause mortality, and they offer positive protective value for all ages and genders. This cost-effective and reliable report can enable life insurers to underwrite policies more accurately, improve risk posture when fewer reports are required and drive efficiency.

About life insurance solutions from LexisNexis LexisNexis helps customers predict, assess and manage risk, while upholding the highest standards of security and privacy. With life insurance solutions from LexisNexis, carriers can gain a comprehensive view of an individual’s background, household and lifestyle, enabling them to: •D  ecrease application cycle times • I mprove underwriting efficiency and accuracy •B  etter manage policy administration tasks With more than 40 billion public records from 10,000 sources, LexisNexis is one of the largest providers of public record and contributory content. Our unparalleled data sources, combined with our advanced technology, can help life insurance carriers minimize risk and make better, data-driven decisions throughout the policy lifecycle.

More Than Just Data: Motor Vehicle Records as Lifestyle Indicators for Life Insurers 2

Key findings This study was completed jointly by LexisNexis and RGA Reinsurance Company. LexisNexis and RGA studied 7.4 million MVRs and used proprietary linking technology to cross-reference these requests against the Social Security Death Master File (SSDMF); approximately 73,000 deaths were identified. Subsequently, RGA completed an actuarial mortality study, normalized the data to compensate for possible under-reporting of deaths in the SSDMF, and calculated the relative mortality ratios for various customer segments. Individuals were distinguished based on whether they had clean records, minor violations or major violations on their MVRs. To avoid bias, major violations were pre-defined by RGA, and include infractions such as alcohol- or substancerelated infractions, excess speeding, and reckless or negligent driving. The study examined the relationship between all-cause mortality and MVRs according to three segmentations: • Results by MVR severity • Results by number of violations • Results by number of major violations

Results by MVR severity

First, individuals were separated according to the most severe violation on their MVR. Findings revealed that applicants with one or more major driving violations had higher all-cause mortality than applicants with clean records or only minor violations (Figure 1). On average, having a major violation elevated an individual’s all-cause mortality by 71 percent.

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Figure 1: Exposure distribution and relative mortality by MVR severity and age

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The trends apply across all age groups and genders. Generally, females have a lower incidence of adverse driving records (Figure 2). However, the relationship between all-cause mortality and major violations on an MVR is more pronounced for women than men. Women with a major driving violation present 100 percent greater all-cause mortality than women who do not; men with a major violation have 61 percent higher all-cause mortality than men who do not.

Figure 2: Exposure distribution and relative mortality by MVR severity and gender

Results by total number of violations

Next, individuals were segmented according to their number of driving violations, regardless of severity (Figure 3). It was found that the more violations on an individual’s MVR, the higher their relative mortality ratio. In particular, individuals with 2–5 violations experienced 24 percent higher mortality, and those with six or more violations experienced 79 percent higher mortality ratios. The trends are consistent across all age groups, demonstrating that the number of violations is an important predictor of excess mortality.

At a glance Compared with applicants with clean records or minor violations on their MVR, individuals with a major driving violation have higher all-cause mortality—by an average of 71 percent. The relationship between all-cause mortality and major violations on an MVR is consistent across all age groups. Notably, the trends are more pronounced for women than men. The number of violations is an important predictor of excess mortality. Individuals with a high number of major driving violations represent the worst risks.

Figure 3: Exposure distribution and relative mortality by number of violations and age

More Than Just Data: Motor Vehicle Records as Lifestyle Indicators for Life Insurers 4

Results by number of major violations

Finally, individuals were separated according to the number of major violations on their MVR (Figure 4). Results showed that individuals with a high number of major driving violations represent the worst risks. Having just one major violation on an MVR elevates an individual’s all-cause mortality by 51 percent; with four or more violations, their mortality is more than twice that of individuals without major violations.

At a glance This study demonstrates that: •M  VRs are a suitable and reliable predictor of the lifestyle risk associated with an applicant. •M  VRs can help improve risk posture when fewer reports are ordered.

Figure 4: Exposure distribution and relative mortality by number of major violations

Notably, the majority of individuals have clean records or only minor violations on their MVRs—and based on this study, their all-cause mortality is consistent with actuarial projections. This demonstrates the suitability of MVRs as a predictor of standard or preferred risks.

Discussion This research shows that MVRs are a reliable predictor of the lifestyle risk associated with an applicant. By examining the severity and number of violations on an applicant’s MVRs, a life insurer can make more accurate pricing decisions, improve risk posture and improve underwriting efficiency.

•M  VRs can help insurers improve efficiency. By examining the severity and number of violations on an applicant’s MVRs, underwriters can more accurately predict the risk associated with that individual.

MVRs are a suitable and reliable indicator of lifestyle risk

While a growing body of information exists to link an applicant’s lifestyle to his/her risk profile, the suitability of using social-networking, online-shopping and magazine-subscription data in the underwriting process is muddy. As this study demonstrates, MVRs are a suitable predictor of all-cause mortality. Furthermore, of the 7.4 million records that were referenced in this study, the majority of individuals had clean records or only minor violations. These individuals exhibited normal mortality ratios, demonstrating the utility of MVRs as an indicator of standard or preferred risks.

More Than Just Data: Motor Vehicle Records as Lifestyle Indicators for Life Insurers 5

MVRs can help improve risk posture when fewer reports are ordered

Applicant retention is an issue for most carriers. In cases where underwriters are striving to improve the customer experience by ordering fewer reports, MVRs offer excellent protective value because they offer insights into an applicant’s lifestyle risk.

MVRs can help insurers improve efficiency

MVRs are one of the more affordable data sources available to life insurers. Furthermore, real-time availability of MVR data means that insurers can streamline their processes and reduce cycle times to improve efficiency and increase profitability.

Summary This research shows that MVRs are a low-cost and reliable predictor of an applicant’s risk lifestyle and all-cause mortality. Notably, the presence of one or more major violations increases an individual’s all-cause mortality, and individuals with several major violations represent the worst risks. By examining the number and severity of violations on an applicant’s MVR, underwriters can more accurately predict the risk associated with that individual. This positive protective value is enhanced in cases where underwriters order fewer reports.

Life insurance solutions from LexisNexis: About the team Elliott C. Wallace is the vice president and general manager of life insurance at LexisNexis Risk Solutions. He has held key executive positions at leading organizations in the insurance, technology and healthcare industries, including Nationwide Financial Group and Allstate Insurance Corporation. Wallace has a master’s degree in technology, strategy and management from Northwestern University. Contact him at [email protected] Jena L. Kennedy is the director of life insurance at LexisNexis Risk Solutions. Prior to joining LexisNexis, Kennedy was an assistant vice president at LOMA, where she worked in the Educational Programs Division. She holds FLMI, ALHC, ACS and CLU professional designations, and has a master’s degree in risk management and insurance from Florida State University. Contact her at [email protected]

References “Insurers Test Data Profiles to Identify Risky Clients,” The Wall Street Journal, November 18, 2010 .

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“An Analysis of Motor Vehicle Records and All-Cause Mortality,” LexisNexis and RGA Reinsurance Company, 2012.

More Than Just Data: Motor Vehicle Records as Lifestyle Indicators for Life Insurers 6

For more information:

Call 800.458.9197, or email [email protected] About LexisNexis Risk Solutions LexisNexis Risk Solutions (www.lexisnexis.com/risk) is a leader in providing essential information that helps customers across all industries and government predict, assess and manage risk. Combining cutting-edge technology, unique data and advanced scoring analytics, we provide products and services that address evolving client needs in the risk sector while upholding the highest standards of security and privacy. LexisNexis Risk Solutions is part of Reed Elsevier, a leading publisher and information provider that serves customers in more than 100 countries with more than 30,000 employees worldwide. Our insurance solutions assist insurers with automating and improving the performance of critical workflow processes to reduce expenses, improve service and position customers for growth. About RGA Reinsurance Company RGA Reinsurance Company is the principal operating subsidiary of Reinsurance Group of America, Incorporated. Reinsurance Group of America, Incorporated is a leader in the global life reinsurance industry with approximately $2.8 trillion of life reinsurance in force and assets of $32.3 billion. RGA serves clients from operations in 25 countries around the world, delivering expert solutions in individual life reinsurance, individual living benefits reinsurance, group reinsurance, financial solutions, facultative underwriting and product development. www.rgare.com

More Than Just Data: Motor Vehicle Records as Lifestyle Indicators for Life Insurers

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