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Sentry Insurance Discusses COVID-19 and Ratemaking to the Actuarial Club


On Tuesday, February 22nd, presenters from Sentry Insurance visited the Actuarial Club for a virtual presentation on COVID-19 and Ratemaking. Presenters Steve Marsden, Erin Bretzman, Ben Schuelke, Raychel Watters, and Katie Zeske talked to our club members about their work with nonstandard auto and motorcycle insurance and how those markets were affected by the COVID-19 pandemic.


After an overview of Sentry as a company, Schuelke gave an explanation of what their nonstandard auto and motorcycle lines consist of. Nonstandard auto is a high-risk tier of insurance for drivers who are unlikely to get insurance elsewhere for reasons such as past DUI’s, credit rating, and their overall driving record. Policyholders tend to purchase the minimum limit set by their state, and they prefer short-term policies. Sentry’s motorcycle line of insurance is a more standard and well-established market since motorcycle riders tend to ride as a hobby. Sentry only offers year-long policies for their motorcycle insurance which allows them to better spread the risk throughout the year.


Next, Bretzman took over to talk about ratemaking. Ratemaking is the process of establishing rates/calculating premiums using an estimate of the expected future costs. There are all sorts of costs that must by included in premiums, including: losses, loss adjustment expenses, commission and brokerage expenses, taxes, cost of capital, and more. Losses are made up of two components -- frequency and severity.


Watters continued the presentation with a focus on how Sentry’s nonstandard auto was affected by the pandemic. When quarantine began around April of 2020, there was a big drop in the amount of driving across the country. Driving trends slowly went back up throughout 2020 but did not return to pre-pandemic levels until summer of 2021. Less driving meant that there was significantly less frequency of losses. However, although there was a slight dip in severity, it bounced back quickly as people started to drive worse. Supply chain issues also made repairs more expensive which increased severity of loss costs.


Finally, Zeske talked about the effect of COVID-19 on the motorcycle side of business. Although Sentry saw similar effects on their nonstandard auto and motorcycle insurance lines, the magnitude was quite reduced. Motorcycle loss frequency bounced back much quicker than nonstandard auto’s did. The Actuarial Club is very grateful for Signa and its presenters’ time and insights. We learned a lot about their work in the insurance industry and hope to learn from them again soon!

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