We at Loop have made some strategic and important decisions about what we believe the future of insurance should look like, starting with how insurance is priced.
Traditionally, auto insurance pricing has been a black-box. Insurers ask a long list of questions and they come back with a number but no clear explanation about how they got to that price. You could be a great driver with no accidents and still get quoted very high rates.
At Loop, we believe that everyone should know their price in insurance is calculated.
First, it’s helpful to understand what actually goes into your rate. This will vary company by company, but most companies use the same data. Among the most common are: credit score, occupation, education, homeownership, zip code, and gender.
The traditional rating criteria, used by Geico, Statefarm, Allstate, and Progressive (to name only a few), are demographic and have more to do with your financial status than your ability to drive a car. These variables all serve as proxy factors for other things, and are highly correlated with race, income, and where you live. Consequently, the average auto premium in predominantly African American neighborhoods is 70% higher than predominantly White neighborhoods, making owning and operating a car unaffordable.
The best way to make insurance pricing fair is to tear down the original black-box pricing models and replace them with something entirely different. Instead of being priced off of demographics, Loop looks at factors that actually matter, like road risk and the way you drive, completely flipping the traditional pricing model on its head.
The most important addition to Loop’s pricing model is Loop’s road level risk score. Through years of research and modelling Loop was able to calculate the probability of a crash on almost every road in America. With these insights, Loop is able to predict a driver’s crash probability to a level of accuracy never seen before. If you drive on safe roads, you are less likely to have a claim and you deserve the best rates.
With such an accurate model of risk Loop doesn’t need to use demographics to price insurance, which is why Loop has pledged to not use your credit score, occupation, education, or homeowner status when pricing your insurance.