Underwriting Individual Drivers: A Sequential Approach, [Discussion]

In their paper “Underwriting Individual Drivers: A Sequential Approach,” Cozzolino and Freifelder have formulated a model of an aspect of the underwriting process. Like any mathematical model, it is an abstraction of reality and must omit many details of the actual process. This simplification may make some aspects of the model unrealistic; on the other hand, reducing one aspect of the process to the bare essentials does provide insights which would be otherwise obscured. As long as the reader recognizes the limitations inherent in the use of any model, the authors’ technique is valuable in assessing risk selection rules and in evaluating merit rating schemes. In order to illustrate the practical value of what may appear to be only a theoretical exercise, we have developed two applications of the authors’ model.