Pricing Factors
Pricing Factors help users understand why insurance pricing varies across comparable properties, not just what the pricing is. By analyzing patterns in bound policy data, the system identifies which property characteristics, coverage options, and market factors most strongly influence Rate on Line (RoL).
Overview
Through the usage of Pricing Factors, which attribute RoL variation to specific characteristics, users will be able to understand why certain properties are priced higher or lower than others.
For example, Pricing Factors might reveal that within a peer group of multifamily properties:
- State location explains 25% of pricing variation, with Florida properties averaging 15% higher RoL
- Year built explains 15% of variation, with newer buildings (built after 2010) averaging 8% lower RoL
- Wind/hail coverage explains 12% of variation, adding an average 10% to RoL when included
How Factors Work
Factors are computed dynamically for each peer group defined in Pricing Comparables. When filters are applied (asset type, geography, property characteristics), the system analyzes the resulting set of policies to determine which factors drive pricing differences within that specific group.
This means factor results are always relevant to the selected comparison set. A factor that matters greatly for coastal properties may be less important for inland properties.
Reading Factor Results
Importance Score
Each factor receives an importance score from 0 to 1, representing the proportion of pricing variation it explains. Scores sum to 1 (100%) across all factors.
| Importance Score | Interpretation |
|---|---|
| 0.20+ | Major pricing driver |
| 0.10-0.20 | Significant factor |
| 0.05-0.10 | Moderate influence |
| Below 0.05 | Minor factor |
Directional Impact
Beyond importance, each factor shows its average directional impact on RoL:
- Positive impact (+%): Factor tends to increase RoL
- Negative impact (-%): Factor tends to decrease RoL
Value Breakdowns
For deeper insight, each factor provides value-level breakdowns showing how impact varies across different values:
- Categorical factors (state, carrier): Impact shown per category
- Numeric factors (units, year built): Impact shown by quartile
- Boolean factors (coverage flags): Impact shown for with/without
Current Availability
Pricing Factors are currently available for:
- Multi-Family asset types
- Package, Property, and Liability coverage types
As data coverage expands, additional asset types may be supported.
Technical Documentation
For detailed methodology, see the Factor Analysis section in the Risk Data Reporting Standards:
- Feature Selection — Which factors are included and why
- Model Architecture — How the ML models work
- SHAP Attribution — How factor impacts are calculated
- Model Validation — How model reliability is ensured