MIS770: Analysis of Auto Insurance Broker Influence

This report analyzes a dataset concerning the influence of insurance brokers on auto customers. The study explores the impact of brokers on customer savings, satisfaction, and the factors influencing insurance premiums. The analysis reveals that brokers can help customers save on annual premiums, with savings varying based on broker performance. Over 60% of customers are satisfied with broker services, with satisfaction levels differing across gender and location. The report also examines factors affecting premiums, such as car value, age, and license age. The analysis indicates that the average annual savings are around $260, and that the proportion of men seeking broker services is less than 40%. Furthermore, the report provides insights into appropriate sample sizes for future surveys and concludes that the emergence of brokers has a significant impact on consumers and the insurance industry.

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Analysis of how the Presence of Brokers in the Insurance Industry has Influenced Auto-Customers
Executive Summary
There has been a significant growth in the number of brokers engaging themselves in the insurance
business in the Auto-industry. The data presented indicate how various brokers have influenced a sample
of 400 consumers in the auto-industry. The specifically focuses on how the availability of brokers and
other factors affect the saving or loss they may incur from insurance premiums. According to the analysis
done on the data, the presence of a broker as mid-man between the customer and the insurance company
can lead to a consumer saving some significant amount of cash from the annual insurance premiums,
experience a loss or just break the even. The category under which a customer falls is however, dependent
on the performance of the broker. A broker can either be high performing, average performing or low
performing. On an annual basis brokers can lead a consumer to saving from insurance premiums an
approximate amount ranging between $198.1 to $261.68 dollars. From the sampled population above
60% of the insurance firm customers are satisfied with the presence of brokers in the industry. The
greatest percentage of the satisfied customers of the female gender and people who leave in rural areas.
For the past two years the average annual saving has been within $260. More than 40% proportion of men
are likely to seek broker services. If a study was to be conducted a follow up article sample sizes of 158
and 385 would be appropriate to examine the average amount brokers save on car insurance and the
proportion of comprehensive insurance policies.
Analysis and Interpretation
1. Summary of The Annual Car Insurance Premiums Saved by Consumers from Broker
Services.
The growth of the number of brokers providing brokers services and acting as a middle-man
between the insurance companies and the vehicle owners has shown positive impact in terms of
assisting customers to save on the amount that would have been used to purchase insurance
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premiums. An analysis of the sample data provided indicates that on an annual basis there is a
95% level of certainty that a customer in the Auto-industry can save between $198.81 and
$261.68. This kind of saving creates the relevance of presence of the brokers in the insurance
industry by making customers appreciate their services hence consult them more and in turn
leading to a boom in the brokerage services.
2. Individual Brokers Performance based on Amount a Customers Saves.
Despite assisting customers to save substantial amount of cash from the amount they would have
initially utilized in purchasing of premiums, brokers perform differently. There are those who
perform exemplary, those who perform on an average level and there are low performers.
Looking into the average annual savings customers incurred from various brokers, it is clear that
the best performer all the brokers is broker number two, broker number three follows and is
proceeded by broker number one. The least performing broker is broker is broker number four. A
consideration of saving as the only factor that influences customers choice for a broker would
mean that more customers would be more satisfied operating under broker number two, one,
three, and lastly four respectively.
3. Satisfaction of Customers with Brokering Service.
Overly above 60% of the sampled population of individuals are satisfied the services of brokers
in the insurance industry. Of the 40% proportion of the sampled population, 25% consist of
individuals who are neither satisfied nor dissatisfied, the 15% represent the proportion of
individuals who are not satisfied at all. The rate of satisfaction depends on various factors such
gender and location of residence of the customers. The greatest proportion of satisfied individuals
comprise of the female gender as compared to the male gender. Moreover, people leaving in rural
areas are more satisfied with the role of brokers compared to the proportion of individuals leaving
in the urban areas.
4. Impacts of Various Factors on the current Insurance Premiums.
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There are a number of factors that affect the current insurance premiums. These factors include
among others; the age of the car, the value of the car, the license held in years, the opted excess
amount in insurance. These factors impact current insurance premiums in either as positive or a
negative manner. A positive impact is exhibit where the relationship between the current
insurance premiums and the factor under consideration is directly proportional. Consequently, a
negative relationship is exhibited when the relationship between the current insurance premiums
and the variable under consideration is inversely proportion. Factors that affect the current
insurance premiums in a positive manner are the value of the car and the opted excess amount of
the insurance premiums. Therefore, increase or decrease in either the value of the car or the opted
excess amount would lead to an increase or a decrease in the current insurance premiums
respectively. Factors that affect the current insurance premiums in a negative manner are the age
of the car and the age of the license held in years. Therefore, increase or decrease in either the age
of the car or license held would lead to a decrease or an increase in the current insurance
premiums respectively. If the need to determine how all the four factors combined would affect
the current insurance premium arose, a further analysis on the data indicated that there would be a
significantly positive linear relationship.
5. The annual average saving of car insurance premiums for all customers.
Analysis performed thus far assumes the data is a sample representative of the whole population.
If the data was assumed to capable of appropriately being utilized to make an inference about all
the customers or the whole population of individuals who seek insurance services through
brokers, the data analysis indicates that there was a 95% level of confidence that the mean
amount that a customer would save on an annual basis was within the range of $198.88 and
$261.60. This range of the mean price can however be reduced by increasing the percentage of
guaranteed confidence or increased by reducing the percentage of the guaranteed confidence
interval.
6. Proportion of Customers who Incur Losses Under Brokers.
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Customers react differently to the presence of brokers in the insurance industry. Some react
positively while some react negatively. Positive reaction is exhibited through substantial saving
while negative reaction is depicted via losses incurred by the customer. An analysis on the
provided data indicate that with a 95% guaranteed level of accuracy, the proportion of customers
who incur losses under brokers range between 14.23% and 21.77%. With an increase in the
guaranteed percentage of accuracy would reduce the range of the proportions while a decrease in
the guaranteed percentage would increase the range of the proportion of the customers who incur
losses.
7. Hypothesis test on the performance of average savings over the last two years.
An analysis provided on the data provided show that there is no sufficient evidence to prove the
claim that the average savings on the car premiums have gradually declined over the last two
years. Therefore, the claim by some of the prominent business commentators that the average
saving on the insurance premiums of the vehicles have gone down over the last two years is false.
On the other hand, we can say that the claim by the national insurance brokers association that the
average savings on car insurance premiums is at around $260 is true.
8. How Gender Influence the need for a broker
The analysis performed on the sample data indicate that there is no sufficient evidence to support
the claim that more than 40% proportion of male seek broker services. Therefore, the recent study
that suggests that males are less likely to seek the services of an insurance broker than females is
true. The analysis shows that at 95% guarantee level; not more than 40% proportion of male
gender seek the services of an insurance broker.
9. Appropriate samples for an accurate survey.
If future survey was to be conducted for the purposes of the follow up article that would focus on
the estimation of the average amount brokers save on car insurance premiums and the
comprehensive insurance policies, sample sizes of 158 and 385 would be appropriate to ensure
that the average amount brokers save on car insurance would be within $50 and that the
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proportion of comprehensive insurance policies would be within 5% respectively. Larger sample
sizes are preferred since they are always an assurance of the representation of the whole
population. Larger sample sizes also ensure that the result obtained are accurate, effective,
dependable and an appropriate conclusion can be drawn from them.
Conclusion
The emergence of brokers acting as the conduit between the insurance companies and the customers who
seek insurance services has experienced gradual growth over the recent days. The broker companies
impact consumers experience with insurance companies in different ways. The impact can either be
positive or negative. Positive impact is when a customer’s save from amount they intended to use for
insurance premiums or are satisfied with the services while negative impact is when customers incur a
loss instead or dissatisfied with the services if the brokers.
An analysis on sample data provided indicate that on an annual basis, there is a 95% confidence that a
customer can save approximately between $198.81 to $261.68 when they engage brokers in their
insurances businesses rather than approaching the insurance company directly. The saving a customer can
achieve depends of the performance of individual brokers. There are brokers who are high performing
and lead customers to saving a lot, other perform averagely while others perform poorly leading
customers to save little amount, save nothing or incur a loss. From the sample data the highest performing
broker is broker number two, followed by broker number three, broker number and the least performing is
broker number four. The proportion of customer likely to incur losses in the hands of brokers range
between 14.23% and 21.77%. Regardless, the highest proportion of individuals who are satisfied by the
services of brokers comprise of the female gender and people leaving in rural areas. The proportion of
men who are likely to seek the services of a broker are rate at less than 40% proportion.
The current insurance premiums are affected differently by various factors. These factors include age of
the car, license held in years, the excess amount opted and the value of the car. These factors impact the
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current insurance premium in either a positive or a negative manner. Positive impact is where the
relationship is directly proportional while negative impact is when the relationship is inversely
proportional. The factors with positive impact of the current insurance premiums are value of the car and
excess amount opted. The factors with a negative on the current insurance premiums are age of the car
and the license held in years.
Data analysis performed provides substantial amount of evidence to indicate that within the last two
years, the annual savings on premiums was around $260 and thereby making the claim by some of the
prominent business commentators arguing that the average savings on car insurance to have decreased as
false and the claim by the national premium insurance association that the average saving has remained at
$260 as true. Moreover, there is sufficient evidence that the proportion of men who are very likely to seek
insurance services via brokers is no more than 40% thus making the study result that suggest that the male
proportion are less likely to seek the services of an insurance than females and that the proportion of
males that uses car insurance brokers is no more than 40% is true.
If a further study was to be conducted so that the results would be used in a follow up article, sample sizes
of 185 and 385 would be appropriate to ensure that the average amount brokers saved was within $50 and
the comprehensive insurance policy was within 5% respectively.
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