You’re in the Driver’s Seat


The Problem

The premium that an auto insurance company charges for a policy is dependent on many factors including driving record, number of years of driving experience, age, whether the driver is the principal operator of the vehicle, and whether the driver has had driver training. These factors are encoded in the Safe Driver Insurance Plan (SDIP) step and the rate class assigned to a driver on a policy. The task in this project is to investigate real data from an insurance company to discover the relationships between the driver demographics and the premiums.

Background Information

  • SDIP Levels (also called ‘steps’) are a rating of a driver’s performance. The lower the SDIP number, the safer the driver.
  • All new Massachusetts drivers are assigned to SDIP 15.
  • Premium costs increase or decrease depending on SDIP rating.
  • A driver’s rate class, which is determined by factors such as age and years of driving experience, also affects premiums.

Materials Included

  • Background information about SDIP steps and rate class codes
  • Student worksheets (Worksheets.doc) introducing the project.
  • Data table of SDIP levels, number of policies at each level, number of policies that reported losses, and total monetary losses incurred at each SDIP level and rate class. See the spreadsheet “You’re in the Driver’s Seat.xls”
  • Six separate project questions, each with student exercises, explanations, and sample solutions.
  • A spreadsheet (Surcharge Points.xls) to automatically calculate premiums according to the new SDIP system
  • Correlation coefficient tutorial