UNDERWRITING QUALITY INDEX (UQI)

1 UNDERWRITING QUALITY INDEX (UQI). CONFIDENTIAL & PROPRIETARY. ANY DISTRIBUTION IS PROHIBITED. This guide and the UQI are learning tools intended strictly as overviews of some of the applicable UNDERWRITING guidelines. In the event of any difference between the UQI or this overview and applicable UNDERWRITING guidelines, the UNDERWRITING guidelines will take precedence. UNDERWRITING guidelines vary by state. Table of Contents Overview 3. Objective 3. How it Works 4. UQI Report Preview 5. Calculating the UQI Score 6. How to Access Agent UQI Report 7. How to Access Agent Policy Detail 10. How to Export UQI Report 11. One Year Auto/Home Profitability 12. Three Year Auto/Home Profitability 14. Property Inspection Initial Cancel Rate 16. Roof Age Discount Trigger Expiration Rate 18. Prefill Change Rate Year Built & Sq. Ft.

2 20. Low Coverage A per Sq. Ft. 22. Proof of Prior Insurance Dispute Rate 26. Household Non-Rated Drivers Composite 29. California Auto Annual Mileage 32. CONFIDENTIAL & PROPRIETARY. ANY DISTRIBUTION IS PROHIBITED. This guide and the UQI are learning tools intended strictly as overviews of some of the applicable UNDERWRITING guidelines. I n the event of any difference between the UQI or this overview and applicable UNDERWRITING guidelines, the UNDERWRITING guidelines will take precedence. UNDERWRITING guidelin es vary by state. Overview INTRODUCING THE UQI. When selling insurance, our agents gather and report information used to evaluate and place risks . Successful UNDERWRITING can't happen without the Farmers agent carefully evaluating each risk and collecting accurate information. For this reason, we developed a tool that can provide agencies a simple way to understand certain UNDERWRITING trends and steps they can take to positively impact those trends.

3 We analyzed numerous UNDERWRITING metrics and studied loss frequency across the operating territory to understand which factors tend to have the greatest impact on rate accuracy, which influences rate stability and customer retention. The result is the UNDERWRITING QUALITY INDEX (UQI), a helpful resource that provides an insightful view of agency metrics that typically have a greater impact on rate accuracy. The idea is that agencies can take the information provided by the UQI and use it to employ and maintain QUALITY UNDERWRITING practices. QUALITY UNDERWRITING will help achieve rate stability for our customers, which can lead to a more positive customer experience. The bottom line is that those agents with the highest UQI scores tend to have the best retention results, which ultimately leads to more profitable growth and better Agency Growth Model scores.

4 The steps for using the UQI are straightforward: Analyze the UQI results Identify areas with potential for improvement Reference the Best Practice resources for any given area of focus Implement Best Practices in your operation Monitor UQI results on an ongoing basis, and modify your plan as needed There are numerous advantages to using the UQI: Emphasis is placed on the proactive, focusing on the things you can do to make a positive impact on results The UQI is a useful training tool that can raise awareness as you are working with staff It aligns with our Smart strategy, helping you place appropriate controls in your agency It identifies simple steps agents and staff may take to impact UNDERWRITING results. In doing so, it provides you with the expanded potential for better customer experience and retention OBJECTIVE.

5 When analyzing your agency results, consider that the goal of the UQI is not to demand perfection, but rather it's to help drive improvement in key UNDERWRITING metrics that typically drive improved UNDERWRITING QUALITY , customer experience, retention, and profitability. The UQI measures and identifies trends that are outside of the average agent result. Focus should be placed on those trends, not the unique and rare scenarios that are bound to occur at some point in time. When those unique, or atypical, situations do occur, the metric thresholds serve as a way to protect you from any negative impact that may be caused by their occurrence. Only when those unique situations occur more frequently than the average is when it becomes an UNDERWRITING trend that is addressed by the UQI. 3. How it works 4. The UNDERWRITING QUALITY INDEX is a support tool to assist agents in their evaluation of certain business results and creation of a profitable growth strategy.

6 It is a scorecard of eight different metrics related to profitability, UNDERWRITING QUALITY and customer experience. Understanding the UQI metrics and their relationship to UNDERWRITING results can go a long way toward helping drive positive growth and profitable trends in your agency. Here is how the UQI works. The UQI provides your agency with a score ranging from 1 to 4, with 1 being the lowest score and 4 being the highest. Depending upon your state, the agency score is based upon a combination of up to eight different metrics relating to profitability and QUALITY factors. In order to receive a UQI score, you have to receive a point value in at least four metrics, including the profitability metrics. For all of the QUALITY metrics, you have to have at least 10 qualifying transactions in order to earn a point value for that metric.

7 For instance, on the Roof Age Trigger Expiration Rate metric, you have to have written at least 10. policies with the New Roof discount in order to receive a point value for that metric. METRICS AND POINTS AVAILABLE. Point Metric s 1 Auto/Home 1 Year Profitability Profitability 1 Auto/Home 3 Year Profitability 1 Home Property Inspection Initial Cancel Rate 1 Home Roof Age Trigger Expiration Rate (Not applicable in CA, ID, MD & OR). 1 Home Prefill Change Rate - Yr. Built & SQ. FT. 1 Home Percent of Low Coverage A per SQFT. 1 Auto Proof of Prior Dispute Rate (Not applicable in CA). QUALITY 1 Auto Household Non-Rated Drivers Composite 1 *Auto CA Percent of NB 8K Annual Miles Driven (CA Only). 1 *Auto CA Percent of VIF 8K Annual Miles Driven (CA Only). You can earn up to one point per metric based on results vs. target in each metric and in most cases, partial points may be earned.

8 The percentage of possible points earned determines the agency's score as illustrated below: Agency % of UNDERWRITING QUALITY Agency Score Possible Points 4 3 Metric Performance 2 1 Achieving the Metric Performance Goals will assist the agency in maintaining QUALITY UNDERWRITING practices. 4. UQI Report Preview Shown below is the agent view of the UQI report Reviewing your agency's score provides you with another way to analyze your agency's growth strategy and some of the factors that can drive better results. Using the insight that the UQI provides, you can make meaningful and relevant changes to your operation that may help you achieve sustained profitable growth. We all recognize the need to improve and achieve better business results. With that in mind, the UQI landing page, located on the Agency Dashboard, provides Tip Sheets for each metric contained within the UNDERWRITING QUALITY INDEX .

9 As you begin identifying areas for improvement, refer to the Tip Sheets for best practice solutions to help achieve sustained UNDERWRITING success in your operation. Consider working with your District Manager and/or Territory support team to review your strategy and seek the additional input or perspective they may be able to provide as you and your team strive for success. 5. Calculating the UQI Score 1. Points Earned Add the total points earned from each of the applicable metrics. In this example, points were earned. 2. Points Possible Add the total points possible for each metric. In this example, points were possible 3. Agency Score To derive the Agency Score, divide the points earned by the number of points possible. In this example, = In this example of the points possible were earned. This determines the Agency Score of 3.

10 Percent of Possible Agency Score points earned 4. 3. 2. 1. 6. How to Access Agent UQI Report To access your agent level UQI report, follow the steps outlined below: 1. From the Agency Dashboard Home page, select the Reports tab 2. On the Reports tab, select the Drive to Profitability & UQI banner or Drive to Profitability & UQI. report link (mid-left of Reports page). 3. The Drive to Profitability landing page will appear to view your report, select the Launch the UNDERWRITING QUALITY INDEX banner 1. 2. 2. 2. 7. How to Access Agent UQI Report 3. 8. How to Access Agent UQI Report When first accessing the report, a Prompts box will appear. This box is where you'll select the time period of the report you wish to view. Follow the steps below to view the UQI results: 1. Select the desired time frame 2. Click the right arrow (>) button 3.