Download Better understand and make simulation in the insurance industry to increast underwriting profit in a context of imperfect files

Tricast
SEUGI
15th - 17th June 1999
Jean Boudy
Tricast Development Ltd.
Tricast
(coming from old systems)
Tricast
(in Insurance: policies and claims)
(ex: an automobile policy without the name of the agent)
(codes or words versus list boxes)
(ex: invert the age of the driver and the age of the car)
Tricast
policy
(coverage)
premiums
car
agent
…...
policies
- some policies are not in the agents file
- some policies are not in the premiums file
- some claims have no reserve,
-…
claims
n° and
type of claim
payments
and reserves
…….
depending on the type of analysis, some imperfections are or not a problem
for example : - the lack of the agent’s name is not a problem to analyze the results per sex
- the lack of sex is not a problem to analyze an agent’s portfolio
so, define the data which are essential, and take off or classify in “unknown” all records which contain a
mistake regarding a specific analysis
Tricast
policy :
coverage
premiums
car
agent
…...
policies
- some misspellings : different spellings of a car maker (Mercedes, Merc., Mercedez, …)
- some incorrect codes : F, W instead of “feminine”
- incorrect coverage name or code
-…
claims
n° and
type of claim
payments
and reserves
…….
for each type of analysis, some imperfections can be corrected :
- all spellings of “Mercedes” and “Benz” can be grouped in the same class
- all codes which are identified as having the same meaning can be grouped with the same name
the other mistakes and missing values are grouped in an “unknown” class.
If they are not many, no problem.
Tricast
group the data which are the same : CCAE = ACCEA + ACE + CCAE
Tricast
group the data which are the same : CCAE = ACCEA + ACE + CCAE
Tricast
group the data which are the same : CCAE = ACCEA + ACE + CCAE
Tricast
missing or impossible values :
1 and 13 years old automobile drivers classified as “unknown”
Tricast
( in Europe and Asia Pacific )
- people are often hesitating between 2 extremes :
. one is to say that they cannot do anything before checking all files and records
(it may be a way to do nothing !)
. use the files as they are
(which sometimes make the results surprising, and, finally, not really used)
- in most situations, interesting things can be done if a pragmatic approach is taken
but one thing should be kept in mind :
prepare files for Data Mining and simulations is something else than correct files
for the traditional systems (manage a portfolio, accounting, …)
Tricast
(find ideal modifications)
Tricast
Tricast
acceptance rules
rating
find the right balance between the three leverages
RUCS :
- to improve the profitability
- to increase the competitiveness
1. understand
(data mining)
2. find ideal modifications
(multidimensional models)
3. find realistic decisions
(simulations)
distribution’s
control
Tricast
- helps to clean the files
- defines the data and codes
- quality and
luck
- understand
profit and
losses
- find segments
of profit or losses
- simulations of
the acceptance
rules
- find ideal
- find the best
modifications
mathematical
(multidimensional formulas
analysis)
- find the Pure Premium
- simulations
of the risk profiles
of changes
Tricast
Underwriting :
sales point analysis :
- allows to analyze the underwriting quality and luck (good or bad luck)
- allows to analyze the risk profiles to see if a too high Loss Ratio comes from the
underwriting quality or from a too low rating of the geographical area
Remaining loss ratio ( simulation of changes of the underwriting policy) :
- allows to find profit and losses centers
- allows to make simulations of changes in the acceptance rules to see what would be the
result
- with an iterative process;
Tricast
Rating :
Rating improvement (multidimensional analysis and simulation of changes) :
- find the data which are not properly rated
- gives the ideal modifications to minimize the Loss Ratio dispersion
- gives the ideal modifications to reach a new Loss Ratio
- allows to make simulations to find the consequences of changes in a rating
Modelization of the Pure Premium :
- helps to find the best mathematical formulas to rate the frequency and average cost of
each coverage and modelizes the pure premium
- gives the Pure Premium of each coverage for each risk profile
Tricast
has been
. sales productivity : 3 times the average of the industry
(4 to 1 hit ratio versus 12 to 1)
. Loss Ratio : 10 points below Market’s average
- close to the real needs of a Company, being in a real world
- built to be directly used by:
. the Actuaries for Rate making and Rating improvement
. the Products managers in charge of defining the acceptance rules
. the Marketing and Sales Managers for improving the Underwriting quality
Tricast
Let ’s now see some of the RUCS functions
Tricast
if you wish any information :
Tricast Development Ltd.
13 rue de la Harpe 75005 Paris
tel. 33 1 46 34 66 80
fax 33 1 46 34 66 83
[email protected]