Using driving behavior data to refine territorial pricing

Driving behavior data for territorial pricing: Insights from ITC 2025

Key takeaways

Territorial pricing in auto insurance is evolving — and driving behavior data is at the center of this transformation. In this ITC 2025 session, industry experts explore how mobility insights reveal patterns in risk exposure, commuting trends, and driver habits. Discover how insurers can leverage telematics and trip-level data to improve underwriting, refine pricing models, and boost profitability.

1. Territorial ratemaking 101

• Territory is a foundational factor in auto insurance pricing, consistently ranking among the top five rating variables.
• It reflects geographic risk differences, influenced by factors like historical claims, traffic density, and weather.
• Unlike general product pricing, insurance must predict future losses based on personal and location-based characteristics.

2. Challenges with traditional territory rating

• Data limitations: Traditional models rely on infrequent claims data, which can be sparse and less credible, especially at granular levels (e.g., zip codes).
• Supplemental data issues: Insurers often fill gaps with third-party data that may be outdated or not reflective of current driving behaviors — an issue heightened by recent changes such as those from COVID-19.
• Impact: These limitations hinder timely, accurate risk assessment and pricing adjustments.

3. Innovation: Integrating driving behavior data

• Transformative approach: Real-time driving behavior data is now available and being integrated into territorial models.
• Benefits: This data provides current, predictive insights into driver risk, enabling more precise segmentation and rate adjustments.
• Competitive edge: Early detection of emerging risk trends and improved actuarial justification for rate changes.

4. Case study: Quincy Mutual

• Background: Quincy Mutual, a regional insurer in Massachusetts and New England, faced challenges with limited internal data and uneven agent distribution.
• Solution: Adopted Arity’s Geosight to supplement their rating plans without overhauling existing systems.
• Results: Achieved improved risk segmentation, especially in data-sparse regions, and identified year-to-year and regional variability in driving behavior.
• Operational efficiency: Enabled actuaries to work directly with the data, reducing IT resource needs and speeding up innovation.

5. Arity’s Geosight product: Features and benefits for auto insurers

• Granular risk segmentation: Provides up-to-date driving behavior data at the zip code level, allowing for more accurate pricing and reduced adverse selection.
• Regulatory support: Supplies behavior-based evidence to support rate filings with state insurance departments.
• Broad coverage: Covers about 15% of U.S. drivers, spanning 96% of populated zip codes. Metrics include hard braking, phone distraction, and speeding.
• Flexible data delivery: Data is aggregated monthly, with options for quarterly or semi-annual updates.
• Data collection: Sourced from mobile apps, in-car devices, and OEM partnerships, in accordance with our Privacy statement.
• Lifecycle support: Enhances insurer capabilities across marketing, pricing (new business and renewals), and claims handling.

6. Additional insights

• Strategic value: Driving behavior data proved especially valuable in unfamiliar or low-experience regions, helping correlate new risks with known ones and guiding agency pricing.
• Accessibility: The data’s user-friendly format allowed for quick adoption and innovation, even with limited resources.

7. Conclusion

• Modernizing territory rating: Integrating real-time driving behavior data addresses the shortcomings of traditional territory-based rating.
• Enhanced segmentation and pricing: Insurers can achieve more dynamic, accurate, and justified pricing strategies, as demonstrated by Quincy Mutual’s successful use of Arity’s Geosight solution.