FinalSessionNumber Casualty Actuarial Society| Ratemaking and Product Management (RPM) Seminar - Concurrent Sessions

Casualty Actuarial Society

Ratemaking and Product Management (RPM) Seminar - Concurrent Sessions

Ratemaking and Product Management (RPM) Seminar
March 11–13, 2013

Hyatt Regency Huntington Beach Resort & Spa
Huntington Beach, Ca

Concurrent Sessions

CL-1: Creating a Data Driven Culture

What is the difference between having lots of data and having a corporate culture that relies on data to drive better business decisions? What factors help some companies achieve this goal? What barriers prevent the efficient use of data at others? Building on the success of last year's interactive roundtable discussion, this year's session will be a fully interactive, audience participation driven look at best practices, barriers, success stories, and the role of actuaries in creating a data driven culture.

    Moderators:
    Daniel P. Post, Vice President and Actuary, The Hartford
    Speakers:
    Robert Walling, Principal and Consulting Actuary, Pinnacle Actuarial Resources, Inc.

Presentations:
Presentation 1

CL-2: Survey of External Data Possibilities for Commercial Insurance

The landscape of available external data that can be used to augment commercial lines pricing models is constantly evolving. This session will attempt to provide a comprehensive overview of longstanding options, new enhancements, and the latest and greatest options. The presentation will be completely vendor neutral and will focus on what data is available and how it can be used. Data options for all major lines of commercial insurance including auto, property, workers compensation, medical professional liability, and general liability will be addressed.

    Moderators:

    Speakers:
    Robert Walling, Principal and Consulting Actuary, Pinnacle Actuarial Resources, Inc.

Presentations: Presentation 1

CL-3: Catastrophe Modeling for Commercial Lines

This session will address catastrophe modeling from a commercial lines perspective, where modeled losses can be highly dependent on assumptions concerning construction and occupancy mappings, proper accounting for policy conditions, dealing with large data sets, and extra coverages. Improved methodologies for modeling business interruption and complex industrial facilities, approaches for understanding the sensitivity of modeled losses to input data, and trends in how commercial lines insurers are using catastrophe models will be discussed.

    Moderators:

    Speakers:
    David Lalonde, Senior Vice President, AIR Worldwide Corporation
    Vijay Manghnani, Analytics and Exposure Officer, AIG

Presentations:
Presentation 1

CL-4: Predicting the Unpredictable Commercial Line Business – Predictive Modeling Applications for Excess Loss and Specialty Lines

In the last several years, people have begun to apply predictive modeling techniques to commercial business. The commercial line applications have been focused on the primary lines of business, including Auto, BOP, WC, and Package. In this session, we will discuss how predictive modeling can be further applied to more difficult and volatile commercial business. Two topics will be presented, one on specialty business such as D & O and EPL, and the other on excess loss.

    Moderators:

    Speakers:
    Mark Hoffmann, Senior Manager, Ernst & Young LLP

Presentations:
Presentation 1
Presentation 2

CL-5: Cyber Data and Analytics

The underwriting and pricing process for a cyber risk is mainly driven by qualitative rather than quantitative aspects. Availability of cyber event data however has grown rapidly over the past few years due to cyber-disclosure guidelines. By leveraging an extensive cyber event data set together with predictive model approaches, we are introducing more rigor into the cyber insurance risk evaluation process.

    Moderators:

    Speakers:
    Mark Hoffmann, Senior Manager, Ernst & Young LLP
    James D. Blinn, Advisen Ltd.

Presentations:
Presentation 1

CP-1: Extending the Asset Share Model: Recognizing the Value of Options in PandC Insurance Rates & Beyond the Cost Model: Understanding Price Elasticity and Its Applications

Extending the Asset Share Model: Recognizing the Value of Options in P & C Insurance Rates is the Winner of the 2013 Ratemaking Prize for the Best Call Paper.

    Moderators:
    John Baldan, Director, Modeling Division, ISO
    Speakers:
    Serhat Guven, Senior Consultant, Towers Watson
    Michael B. McPhail, Director - Auto Pricing, United Services Automobile Association
    Greg McNulty, Pricing Actuary, SCOR Reinsurance

Presentations:
Presentation 1
Presentation 2
Presentation 3

CP-2: PEBELS: Property Exposure Based Excess Loss Smoothing & Catastrophe Pricing: Making Sense of the Alternatives

PEBELS: Policy Exposure Based Excess Loss Smoothing is the Winner of the 2013 Ratemaking Prize for the Most Practical Paper.

    Moderators:
    Benjamin R. Newton, AVP and Actuary, Navigators Insurance Group
    Speakers:
    Marquis J. Moehring, AVP and Actuary, Navigators Insurance Group
    Ira Robbin, AVP and Actuary, Navigators Insurance Group

Presentations:
Presentation 1
Presentation 2

CP-3: Indemnity Benefit Duration and Obesity & Bayesian Trend Selection
    Moderators:
    Sandra Callanan, Pricing Actuary
    Speakers:
    Chris Laws, Research Consultant, National Council on Compensation Insurance

Presentations:
Presentation 1
Presentation 2

DM-1: Homeowners Ratemaking by Peril - Data Issues

In homeowners insurance, consumers are charged a single price for the coverage; however, this coverage involves multiple perils. This session discusses the data issues involved in determining a price for multiple perils. Some of the issues that will be explored include preparing the data for modeling, dealing with loss data - including text mining approaches, dealing with missing values, dealing with geographic data, role of Public Protection Class, segmentation opportunities, use of principal components, improving model robustness and methods to reduce the number of potential predictors.

    Moderators:
    Anton Zalesky, Chief Actuary, AAIS
    Speakers:
    David Cummings, Vice President and Chief Actuary, ISO Innovative Analytics
    Michael Nielsen, Actuary, United Services Automobile Association

Presentations:
Presentation 1

DM-2: Integrating Text-Data into Predictive Analytics: A Demonstration Using Motor-Vehicle Crash Descriptions to Identify Drivers under the Influence of Legal or Illegal Drugs

A 2007 survey by the National Highway Traffic Safety Administration found that 16.3 percent of nighttime drivers tested positive for legal or illegal drugs. The study was not part of an enforcement initiative but a random, roadside study. Although there are widely-accepted tests to check whether a driver is under the influence of alcohol, no comparable tests exist for whether a driver may be under the influence of a legal or illegal drug.

A driver in a motor vehicle crash may be reluctant to admit that drug use impaired their driving. Furthermore, some drivers may have considered the consumption or the amount that was consumed not to be noteworthy. Finally, conventional reporting forms may not have the necessary options to capture the information – which may especially be the case with pharmaceutical medications. Claim adjuster notes provide a data source to identify drug use not captured at the time of the accident or on conventional reporting forms. Furthermore, there are a considerably large number of medical conditions and medications to be captured and conventional structured-data forms may not be capable of capturing the many types and conditions associated with drug use. The National Motor Vehicle Crash Causation Survey database provides crash descriptions for a large sample of motor vehicle accidents. The crash descriptions are an unformatted text data that can extend to several hundred words. The crash descriptions are very similar in form and substance to property-casualty claim adjuster notes.

This presentation will demonstrate how text data can be mined and integrated with structured data to perform predictive analytics. The value of the text data is that the explanatory power of predictive analytics is improved over the case where predictive analytics are limited to structured data.

    Moderators:
    Paul D. Anderson, Consulting Actuary, Milliman, Inc.
    Speakers:
    Philip S. Borba, Principal, Milliman, Inc.

Presentations:
Presentation 1

DM-3: Homeowners Ratemaking By Peril - Application and Implementation

Our second session on by Peril Ratemaking explores the application and implementation of the multi-peril rates. The topics in this session will include why we rate by peril, grouping of perils, variable selection, model validation, development of factors, territorial ratemaking, pricing cat perils and issues in creating manuals, making filings and handling state exceptions.

    Moderators:
    David Cummings, Vice President and Chief Actuary, ISO Innovative Analytics
    Speakers:
    Anton Zalesky, Chief Actuary, AAIS
    Dan Pickens, Vice President-P&C Actuary, USAA Insurance Group

Presentations:
Presentation 1
Presentation 2
Presentation 3

II-1: Price Optimization for the U.S. Market: Techniques and Implementation Strategies

Over the past year, with an increase in integration of customer demand information into the ratemaking process, there has been a significant increase in the adoption of price optimization approaches in the U.S. This session will consider the technical aspects of price optimization, from establishing an understanding of elasticity to deriving rating structures that best meet corporate objectives. The incorporation of practical business and regulatory constraints will also be discussed. The session will also examine the advantages and disadvantages of optimizing the rating relativities directly as opposed to modeling individually optimized premiums.

    Moderators:
    Duncan Anderson, Managing Director, Towers Watson
    Speakers:
    Duncan Anderson, Managing Director, Towers Watson
    Michael McPhail, Director - Auto Pricing, United Services Automobile Association

Presentations:
Presentation 1

II-2: Business-Driven Implementation Strategies

Predictive models recently have become more sophisticated and are applied to more areas of the insurance business (pricing, underwriting, claims triage, etc.). Actuaries have become more involved and adept in model development, but rapid, high-quality model implementation remains a key challenge to obtaining value from the analytic work.

This session will be a case study of how a model was developed and implemented within 8 weeks. It will include a review of the data preparation for the model, the modeling, as well as the metrics that resulted from the model and could be used by business to determine the most profitable versus least profitable segment of business and distribution channels/agents. We will show how a loss ratio, retention, and overall book quality score was derived to be implemented on new and renewal business during the quoting and underwriting stages. Our case study will use a real insurance company selling homeowners insurance, but could be equally applied to other carriers and lines of business.

    Moderators:
    Terry Broom, Vice President-Business Development, EagleEye Analytics
    Speakers:
    Terry Broom, Vice President-Business Development, EagleEye Analytics
    Sheri Scott, Consulting Actuary, Milliman, Inc.

Presentations:
Presentation 1

II-3: Adventures in Rate Capping

As companies gain better understanding of their customers' sensitivity to price, more insurers are implementing Rate Capping programs. Under Rate Capping, a customer's rate increase (or decrease) may be capped at renewal. Therefore, a new business risk and a renewal risk, all else being equal, may pay different rates, at least in the near term.

Companies' primary motivations for Rate Capping are that they believe it meets their customers' preferences for stable rate changes. However, managing Rate Capping can prove difficult. Many of the challenges do not emerge until capping has been implemented and is in place for several years.

In this session, we will discuss the pros and cons of Rate Capping and the various challenges it presents, such as its implications for rate indications, managing calendar year results, implementation, and data. The panel will discuss how companies can address these inherent complexities.

    Moderators:
    Thomas Hess, Assistant Actuary, Ohio Department of Insurance
    Speakers:
    Morgan H. Bugbee, R and D Actuary, Farmers Insurance Group
    Richard Ross, Director - Auto Pricing, USAA

Presentations:
Presentation 1

II-4: Intelligent Use of Competitive Analysis

Competitive analysis is one of the key elements in measuring the performance of a rate algorithm. This requires the capture and analysis of competitive data. Over the years, much work has been performed in capturing the data; however, there is a significant lack of sophistication in analyzing it. This session will begin by discussing the sources and challenges of acquiring good competitive information. Then, the focus will be on how to analyze the data to make informed decisions. Analysis strategies will run the gamut from traditional mining of the data to more sophisticated analysis and then to incorporation of the information into demand curves.

    Moderators:
    Serhat Guven, Senior Consultant, Towers Watson
    Speakers:
    Serhat Guven, Senior Consultant, Towers Watson
    Kelleen Arquette, Consultant, Towers Watson

Presentations:
Presentation 1
Presentation 2
Presentation 3

II-5: Implementing Value Based Pricing - What and How People Buy

Ronald Baker will build upon his well received sessions on breaking commodity-based thinking from previous RPM Seminars. Developing an understanding of the nine factors of price sensitivity not only will assist actuaries in creating better models but provide a platform for management and product managers to identify new niches, better place insurance products, and begin to price customers and not policies.

    Moderators:
    Ronald Baker, Founder, VeraSage Institute
    Speakers:
    Ronald Baker, Founder, VeraSage Institute

Presentations:
Presentation 1

Keynote Address-1: Tuesday Keynote Address

Craig will provide a first-hand account of how predictive analytics techniques were applied to the problem of learning to help prepare for Jeopardy!, the television quiz show. Data analyses of both the problem domain, Jeopardy!, and sampling of the user's strengths and weaknesses were used to develop a plan for success. Craig's system allowed him to increase his proficiency on the material dramatically and subsequently set many records on the show. Other users have also won multiple games after using his software. Comparisons to purely automated predictive analytics systems, such as IBM's Watson project, will also be presented. Anyone interested in the application of data analysis towards self improvement, learning, and education will find this talk of interest.

    Moderators:
    Mary Hosford, US Actuary, BEAZLEY GROUP
    Speakers:
    Roger Craig, CEO and Cofounder of Cotinga LLC

Presentations:

Keynote Address-2: When Number Crunching met the Creative Industry

Nick Meaney, founding CEO of Epagogix Ltd tells the story of how this small British company developed from a risk management background to become a noted advisor to the Hollywood film industry. Epagogix combines expert process with bespoke neural-network technology and provides both quantitative and qualitative information.

    Moderators:
    Mary Hosford, US Actuary, BEAZLEY GROUP
    Speakers:
    Nick Meaney, Managing Director/CEO, Epagogix Ltd, London UK

Presentations:

PL-1: Beyond Auto - Lines You Are Less Familiar With

This session will explore two lines of business that you may not know a lot about: lender-placed home insurance and boat owners insurance. Well explore what lender-placed home insurance is and how it differs from traditional homeowners insurance, what challenges it presents with regard to ratemaking, and why it is attracting regulatory and media attention.

An introduction to boat insurance pricing involves a brief overview of the product/rating plans followed by a discussion of the challenges this line presents to actuaries. This discussion will include considerations of the application of standard pricing methodologies in the areas of rate level indications and rating plan development.

    Moderators:
    Amy Juknelis, Allstate Insurance Company
    Speakers:
    Eric Schmidt, Actuarial Assistant, Allstate Insurance Company
    Patrick Curtis, Actuary, American Modern Insurance Group

Presentations:
Presentation 1
Presentation 2

PL-2: Model Blending

Given the events of the past several years, the development of "custom" views of catastrophe risk through adjusting, or blending output from multiple catastrophe models has become increasingly common among insurance companies.

The benefits of this approach include: modeled results that better reflect a company's actual claims experience and reduced model risk from no longer relying on a single vendor model. This session will briefly discuss vendor catastrophe model validation techniques and then describe several methods, from simple to complex, for adjusting catastrophe model output to develop a "custom" view of catastrophe risk.

    Moderators:
    Shantelle Thomas, Senior Actuary, Allstate Insurance Company
    Speakers:
    Adam Troyer, Director, Aon Benfield

Presentations:
Presentation 1

PL-3: Update on Latest Vehicle Changes and Safety Enhancements - Vehicle Rating Developments

The panelists will discuss recent changes in automotive design and safety characteristics and the latest developments in rating plans utilized for personal and commercial automobile insurance.

    Moderators:

    Speakers:
    Matthew Moore, Vice President, Highway Loss Data Institute
    Gary C. Wang, Consulting Actuary, Pinnacle Actuarial Resources, Inc.

Presentations:
Presentation 1

PL-4: A Look at Asia Personal Lines Markets

This session will provide an overview of the personal auto markets in Asia, with an in-depth look at China, India and Malaysia. The overview will include information about the key players, industry experience, rating variables, residual markets, and distribution. The session will also discuss regulation history with a focus on de-tariff and its impact and implication on the market. In addition, the session will discuss areas where predictive modeling applications can be used to improve the profitability, (e.g., pricing, risk selection, claims fraud detection, marketing).

    Moderators:
    Brian Stoll, Director, Towers Watson
    Speakers:
    Ronald Kozlowski, Director, Towers Watson
    Yao Wang, Director, Towers Watson

Presentations:
Presentation 1

PL-5: Pricing Analytics for the Small- and Mid-Sized Insurance Company

More and more companies are competing on analytics, putting pressure on small and mid-sized insurance companies who don't have the resources or data to do many of the advanced analyses that bigger companies are performing. This session discusses pricing analyses that small and mid-sized insurance companies can use to fight adverse selection and maintain their competitive position. The session will also include a case study of real world implementation issues from the perspective of a mid-sized insurance company.

    Moderators:
    Kelleen Arquette, Consultant, Towers Watson
    Speakers:
    Lenard Llaguno, Consultant, Towers Watson
    Michael Moss, Director, Personal Lines Pricing, The Republic Group

Presentations:
Presentation 1

PMGMT-1: Customer Lifetime Value - Opportunities and Challenges

Customer lifetime value (CLV) is a useful tool in marketing and customer relationship management (CRM). CLV has been gaining ground in the insurance industry over the last several years. Despite the theoretical simplicity of CLV, it is fraught with difficulty when applied in practice. In this talk, we will discuss critical issues to consider when modeling and implementing CLV applications within the insurance industry.

    Moderators:
    Mohamad Hindawi, Consultant, Towers Watson
    Speakers:
    Gregory C. Firestone, Senior Manager, Allstate Insurance Company

Presentations:
Presentation 1

PM-1: GLM I

Do terms such as "link function," "exponential family," and "deviance" leave you puzzled? If so, this session will clarify those terms and demystify generalized linear models (GLMs). The session will provide a basic introduction to linear models and GLMs. Targeted at those who have modest experience with statistics or modeling, the session will start with a brief review of traditional linear models, particularly regression, which has been taught and widely applied for decades. Session leaders will explain how GLMs naturally arise as some of the restrictive assumptions of linear regression are relaxed. GLMs can model a wide range of phenomena, including frequencies and severities as well as the probability that a claim is fraudulent or abusive, to name just a few. The session will emphasize intuition and insight in addition to mathematical calculations. Illustrations will be presented using actual insurance data.

    Moderators:

    Speakers:
    Ernesto Schirmacher, Senior Actuary, Liberty Mutual Insurance

Presentations:
Presentation 1

PM-2: GLM II

GLM I provided the case for using GLMs and some basic GLM theory. GLM II will be a practical session outlining basic modeling strategy. The discussion will cover topics such as overall modeling strategy, selecting an appropriate error structure and link function, simplifying the GLM (i.e., excluding variables, grouping levels, and fitting curves), complicating the GLM (i.e., adding interactions), and validating the final model. The session will discuss diagnostics that help test the selections made.

    Moderators:

    Speakers:
    Ernesto Schirmacher, Senior Actuary, Liberty Mutual Insurance
    Lenard Llaguno, Consultant, Towers Watson

Presentations:
Presentation 1
Presentation 2

PMGMT-2: Using "Tiers" for Insurance Segmentation from Pricing, Underwriting, and Product Management Perspectives

Tier, as a composite variable based on multiple tier elements, has become popular over the last several years for the P&C insurance industry to segment business. It started from personal auto rating, as a new component for aggregating the pricing impact of nontraditional rating variables to expand price range and increase pricing points. Lately, it has been applied to commercial lines. Its application is also beyond pricing now. It appears to have become one of the critical strategic elements in assisting underwriting and product management to more effectively react to market competitions and regulations.

In this presentation, we will discuss several frequently asked questions regarding tier applications:

  • How to effectively design a tiering structure?
  • How to integrate tier with pricing and/or underwriting? For example, should pricing oriented tiers be created for manual and class pricing or for underwriting driven pricing?
  • How to decide the optimal number of tiers?
  • For commercial lines, how to integrate tiers with some other pricing and underwriting components, such as schedule modifications?
  • How to embed underwriting tiers for multiple writing companies?
  • Should pricing tiers be developed based on a pure premium approach or based on a loss ratio approach?
  • What are the differences between personal lines tier applications and commercial lines tier applications?

In this presentation, we will discuss the above through various design options with their pros and cons. We will use numerical examples to support the discussion.

    Moderators:
    Cheng-Sheng Peter Wu, Director, Deloitte Consulting LLP
    Speakers:
    Jonathan White, AVP and Actuary, The Hartford
    Jun Yan, Specialist Leader, Deloitte Consulting LLP

Presentations:
Presentation 1
Presentation 2

PMGMT-3: Product Architecture

Product Architecture is a product management concept rapidly gaining popularity in the commercial lines space. It is a comprehensive mapping of the components, dimensions, and rules of an insurance product with a focus on isolating the reusable assets. Especially when combined with leading product management practices and emerging technologies, the use of product architecture can greatly enhance a company's flexibility in launching new products and reducing the workload associated with product enhancements.

The session will focus on what product architecture is and why it is important, as well as illustrative case study examples of how products are decomposed, how market offerings are built, and expected benefits.

    Moderators:
    Donna Schlegel, Director, Deloitte Consulting LLP
    Speakers:
    Donna Schlegel, Director, Deloitte Consulting LLP
    Kelly Cusick, Senior Manager, Deloitte Consulting LLP

Presentations:
Presentation 1

PM-3: GLM III - The Matrix Reloaded

This session will consider new techniques and refinements to the basic GLM which can add material value to the modeling process.

It will specifically consider amendments which address some of the purported failings of GLMs in comparison to emerging methods such as machine learning techniques.

The session will include a discussion of:

  • An innovative approach to detecting subtle and higher dimensional interactions in an efficient way, potentially eliminating theneed to consider alternative, harder-to-implement model forms such as nonlinear models.
  • The role of such automated methods in comparison with more manual construction of composite explanatory variables.
  • Ways to mitigate the risk of over-parameterization through the use of modifications which incorporate elements of credibility within the GLM framework.
  • Simple practical modeling steps that can be used to remove distortions created by combining models across claim types.
  • Innovative ways of modeling bodily injury claims and other miscellaneous refinements.
    Moderators:
    Alietia Caughron, Vice President, CAN
    Speakers:
    Duncan Anderson, Managing Director, Towers Watson Serhat Guven, Senior Consultant, Towers Watson

Presentations:
Presentation 1

PMGMT-4: Captivated by Captives - Promises and Pitfalls

An interactive discussion of the captive marketplace, including domiciles, types of captives, and common lines of business written. We will address a range of advantages and disadvantages of captive insurance companies, and then initiate a discussion of the areas surrounding captives that can be problematic to an actuary. Particular focus is placed on the calculation of expected loss for lines of insurance with little frequency, estimating premium from loss projections, premium transfer pricing issues, and reserve sufficiency.

    Moderators:
    James Bulkowski, Senior Manager, Ernst & Young
    Speakers:
    James Bulkowski, Senior Manager, Ernst & Young
    Charles Mitchell, Consulting Actuary, Milliman, Inc.

Presentations:
Presentation 1
Presentation 2

PM-4: Model Validation - Seconds Anyone?

As predictive modeling takes off in the insurance community, companies are facing the growing realization that building and implementing the second iteration of a model can be just as challenging as the first. The first version of this talk, "Know Your Audience" (given at the 2011 and 2012 RPM Seminars by this sessions panel) concerned model validation from three perspectives (the modeler, senior management and the regulator) and emphasized the first iteration of a model and the basics. "Seconds Anyone?" will focus on the second model iteration and address the concerns of the same three constituencies.

For modelers, the panel will explore the added challenges in validating the model and what techniques can be used to compare it to the previous version.

For senior management, they will discuss how one should view disruption in the context of incremental changes to the rating plan. From a regulatory perspective, the panel will address the specific areas that should be focused on when evaluating an update to an existing model. Attending the "Know Your Audience" session is not a prerequisite for this session.

    Moderators:
    Kevin Mahoney, Second Vice President, Analytics and Research, The Travelers Insurance Companies
    Speakers:
    Kevin Mahoney, Second Vice President, Analytics and Research, The Travelers Insurance Companies
    Larry A. Haefner, Executive Vice President and Chief Actuary, CNA Insurance Companies
    Richard Piazza, Chief Actuary, Louisiana Department of Insurance

Presentations:
Presentation 1
Presentation 2
Presentation 3

PMGMT-5: Product Managers and Actuaries: A Comparison of Professions

Over the past few years, more and more Commercial Lines insurance companies have been hiring product managers. What roles do these product managers serve, and how do they interact with Commercial Lines actuaries? What makes a successful commercial actuary? What makes a successful commercial product manager? We'll discuss these questions and more with a panel of individuals who have been both Commercial Lines product managers and actuaries.

    Moderators:
    Scott Drab, AVP-Product Manager, Grange Insurance
    Speakers:
    George Busche, Vice President, Product Management Leader, QBE North America
    Donna Glenn, Vice President, Travelers

Presentations:
Presentation 1
Presentation 2

PM-5: And the Winner is…? How to Pick a Better Model

You have just finished running some data through a predictive modeling package. Now all you need to do is summarize the results, send them along, and you're done, right? WRONG. At the absolute minimum, the modeler should understand and demonstrate the goodness-of-fit of the model. In most cases, the modeler should also prove that the constructed model provides lift over the existing rating structure. After all, what good is a new model if it cannot outperform the competition?

In this session we will explore, in significant detail, three often-overlooked components of the modeling process: measuring goodness-of-fit, assessing lift, and internally validating a predictive model. Model development usually is a major investment. We should make sure our models are performing well in order to get the best bang for the buck!

    Moderators:
    Hoi Leung, Predictive Modeling Manager, AIG
    Speakers:
    Dan Tevet, Actuarial Associate Senior, Insurance Services Office, Inc.
    Hernan L. Medina, Manager, ISO Insurance Programs and Analytic Services

Presentations:
Presentation 1
Presentation 2

PM-6: Price Optimization: Construction and Sensitivity Testing of Assumptions

A growing number of insurance companies in North America are engaged with price optimization projects. A successful implementation requires multiple inputs, such as loss cost estimates, conversion and retention models, mid-term cancellation models, and future competitive positioning assumptions. In this presentation, we will introduce the principles of price optimization and evaluate the sensitivity of the optimization results to these inputs and assumptions. For instance, how will a less than optimal loss cost model impact the indicated optimized rating factors? How much effort should we dedicate to building conversion and retention models, and how sophisticated do these models have to be in order to meet the pricing optimization challenge? How will future actions taken by the competition impact the expected values for key performance indicators, such as policies in force or combined ratio? Finally, we will contrast two different approaches to optimization in a highly-regulated environment: reverse engineering and direct factor optimization, focusing on ease of use, quality of optimization results, and ability to meet global constraints.

    Moderators:

    Speakers:
    Reuven Shnaps, Vice President of Professional Services, Earnix
    Eliade Micu, Senior Consultant, Earnix

Presentations:

PMGMT-6: Product Development: From Conception to Execution

This session will illustrate the product manager's role in developing new product offerings, as well as measuring and monitoring performance once such products are in place. Topics to be covered will include an overview of "agile project management", making use of new technology such as (at present) smart phones and tablets, problem solving, and, when necessary, implementation of corrective actions.

    Moderators:
    Scott Drab, AVP-Product Manager, Grange Insurance
    Speakers:
    Scott Drab, AVP-Product Manager, Grange Insurance
    Damon Lay, Actuary and Senior Product Manager, Farmers Insurance Group

Presentations:
Presentation 1
Presentation 2

PM-7: Bayesian and Hierarchical Methods for Ratemaking

This session sketches a dual-faceted framework for ratemaking that has yet to enter the actuarial mainstream. The first facet is hierarchical modeling, which encompasses two pillars of actuarial methodology: Generalized Linear Models and credibility theory. The second is simulation-based Bayesian and Hierarchical Bayesian data analysis, which offers a flexible, practical, and rigorous means of building ratemaking models that can potentially contain hundreds of parameters. Such models rigorously reflect both background knowledge as well as parameter uncertainty in one's rating factors and rate indications.

The session will begin by sketching some relevant background theory and introducing Markov Chain Monte Carlo (MCMC) simulation at an intuitive level. It will then proceed to a series of case studies. Classification ratemaking will be illustrated with hierarchical Bayesian frequency and severity models containing factors for numerous states, class codes, and time trend interactions. The second half of the session will outline a Bayesian approach to aggregate ratemaking in workers compensation. At the core of aggregate ratemaking are loss development (including tail) and trend analysis. For both problems, Bayesian models are outlined and results are presented for an unidentified state. The computer code for both models is in the public domain.

    Moderators:
    Brian M. Hartman, Assistant Professor of Actuarial Science, University of Connecticut
    Speakers:
    James Guszcza, National Predictive Analytics Lead, Deloitte Consulting
    Chris Laws, Research Consultant, National Council on Compensation Insurance
    Brian M. Hartman, Assistant Professor of Actuarial Science, University of Connecticut

Presentations:
Presentation 1
Presentation 2
Presentation 3

PMGMT-7: Incorporating Reinsurance Considerations into Product Design Using an Augmented Price Optimization Framework

This session will discuss how reinsurance profitability analysis conducted in a price optimization setting can inform product design decisions. Indeed, as alternative reinsurance arrangements impact the net risk profile of portfolios, they eventually affect underwriting rules, premium income, policy retention, quote conversion patterns, and ultimately the bottom-line net of reinsurance profitability.

However, usual two-dimensional price optimization analyses fail to capture the impact of reinsurance on portfolio metrics by only focusing on portfolio-level trade-offs between top line volume and gross of reinsurance profitability. By adding a third dimension representing reinsurance spend, such analyses can be expanded and lead to better informed product design decisions. This session will present a conceptual framework and discuss practical challenges for implementation, from data gathering to risk modeling and building adequate management information systems and dashboards.

    Moderators:
    Yves Colomb, Actuary, Towers Watson
    Speakers:
    Yves Colomb, Actuary, Towers Watson
    Jason Harger, Senior Vice President, Willis Re, Inc.

Presentations:
Presentation 1

PM-8: Case Studies in Adding Variable Interactions in GLMs

Model development using Generalized Linear Models (GLMs) has traditionally focused on the search for and inclusion of main effects variables. More recently interactions between variables have become the aim of many practitioners. This session explores various methods employed in identifying variable interactions.

    Moderators:
    Jim Weiss, Manager, Insurance Services Office
    Speakers:
    Chun Li, Director, ISO Innovative Analytics
    Paul Beinat, Director NeuronWorks, University of Technology, Sydney

Presentations:
Presentation 1

PM-9: Balancing Robust Statistics - Gradient Boosting

Gradient Boosting (GB) is an iterative algorithm that combines simple parameterized functions with "poor" performance (high prediction error) to produce a highly accurate prediction rule. GB can be interpreted as the hybrid of traditional statistical modeling and data mining. In contrast to both extremes, GB usually provides comparable accuracy with data mining tools and gives interpretable results similar to GLMs. Another advantage of GB is its requirement of little data preprocessing and tuning of the parameters.

The method is highly robust to less than clean data and can be applied to classification or regression problems from a variety of response distributions (Gaussian, Bernoulli, Poisson, and Laplace). Complex interactions are modeled simply, missing values in the predictors are managed almost without loss of information, and feature selection is performed as an integral part of the procedure. These properties make GB a good candidate for insurance loss cost modeling. However, to the best of our knowledge, the application of this method to insurance pricing has not been fully documented to date. This session presents the theory of GB and its application to the problem of predicting auto "at-fault" accident loss cost using data from a major Canadian insurer. The predictive accuracy of the model is compared against the conventional Generalized Linear Model (GLM) approach and a fancy neural network.

    Moderators:

    Speakers:
    Simon Lee, Director, Pricing innovation, RBC General Insurance Company
    Leo Guelman, Director, RBC General Insurance Company

Presentations:
Presentation 1

PM-10: Loss Cost Modeling vs Frequency and Severity Modeling

In recent years, loss cost modeling using the Tweedie distribution has been gaining popularity in GLM-based predictive modeling practice, joining frequency and severity modeling. This has left us with two widely used GLM design approaches, each with their own strengths and weaknesses. The frequency, severity modeling approach prescribes modeling claim frequency (claim count over exposure) and claim severity (incurred loss over claim count) separately, and then combining those results to create loss cost estimates. Enhancements of the basic frequency-severity approach include the creation of modeled loss cost datasets to facilitate offsetting and special treatment or modeling of high-severity losses. The loss cost approach uses loss cost data (incurred loss over exposure) directly as the target variable in the model. In this session, we will discuss the pros and cons of the two model design approaches during a class plan study or underwriting tier development. The discussion will cover both business and statistical considerations for personal and commercial lines. We will use multiple data sources to illustrate comparisons and support our findings.

    Moderators:
    Jeremy T. Benson, Senior Pricing Actuary - Medical Expense Group, Swiss Re
    Speakers:
    Jun Yan, Specialist Leader, Deloitte Consulting LLP
    Alietia Caughron, Vice President, CAN

Presentations:
Presentation 1

PM-11: Mileage Based Rating in the Current Auto Insurance Environment

Verification of annual mileage for auto insurance has been an issue for years, and has resulted in companies just living with what they know is bad data or deciding to stop using annual mileage altogether. The use of telematics will obviously address the issue, but not completely and not quickly. Only a very small percentage of auto insurance customers are currently using telematics devices, and it will take years for the number of users to increase significantly. Also, because the use of telematics is voluntary, it will not provide a source of verified mileage for those that opt not to use it. So for the foreseeable future, companies will still have to contend with this issue. This session will discuss the use of vehicle history records to validate annual mileage. There are companies that collect vehicle history information from numerous sources, and one of the types of data collected from these vehicle history records is annual mileage.

This session will discuss:

  • How this information is used to verify reported annual mileage.
  • How verified mileage information is used to develop models to predict average annual mileage.
  • Results of analyses that demonstrate the correlation of calculated and predicted average miles to insurance losses.
    Moderators:
    Gary C. Wang, Consulting Actuary, Pinnacle Actuarial Resources, Inc.
    Speakers:
    Matthew Moore, Vice President, Highway Loss Data Institute
    Roosevelt Mosley, Principal and Consulting Actuary, Pinnacle Actuarial Resources, Inc.

Presentations:
Presentation 1

PM-12: Predictive Modeling for Actuaries Book Project

A two-volume book project is underway that will cover basic techniques of predictive modeling in volume 1 and case studies with data in volume 2. As volume 1 is in process to be published during 2013 by Cambridge University Press in their International Series on Actuarial Science, Two co-editors and three chapter authors will present an overview of the whole project as well as some details on three of the Volume 1 chapters.

    Moderators:
    Richard A. Derrig, President, OPAL Consulting LLC
    Speakers:
    Glenn G. Meyers, Joint Risk Management Section Council
    Louise Francis, Consulting Principal, Francis Analytics and Actuarial Data Mining, Inc.
    Peng Shi, Assistant Professor, Northern Illinois University
    Bruce Jones, Department Chair, Western University

Presentations:
Presentation 1
Presentation 2
Presentation 3
Presentation 4

PRO-1: Professionalism for Predictive Modelers

During the past decade, predictive modeling has increasingly become part of many actuaries' job descriptions. Whether building predictive models, implementing them with business partners, or supporting them in rate filings, actuaries are often asked for their opinions on issues that touch on the ethics of the profession. This session will be a scenario-based panel discussion on common issues that arise during predictive modeling, and how those issues relate to the Code of Conduct, Statement of Principles, and Standard of Practice.

    Moderators:
    Kevin Mahoney, Second Vice President-Analytics and Research, The Travelers Insurance Companies
    Speakers:
    Kevin Mahoney, Second Vice President-Analytics and Research, The Travelers Insurance Companies
    Claudine Modlin, Senior Consultant, Towers Watson
    Louise Francis, Consulting Principal, Francis Analytics and Actuarial Data Mining, Inc.

Presentations:

PRO-2: What is ... Professionalism? Take Two!

The ASOP trivia game is back by popular demand with new categories and new questions. Come refresh your knowledge of actuarial professionalism in this interactive session! Who said professionalism can't be fun? This session may provide attendees with Professionalism Continuing Education Credits.

    Moderators:

    Speakers:
    Melanie Ostiguy, Chief Actuary, ACE Bermuda
    Dan Tevet, Actuarial Associate Senior, Insurance Services Office, Inc.
    Anand Khare, Senior Actuarial Analyst, Insurance Services Office, Inc.
    John E. Wade, Senior Consultant, Pinnacle Actuarial Resources

Presentations:

PRO-3: Lights! Camera! Professionalism!

Come enjoy the acting of some fine fellow actuaries who will take on several skits involving professional dilemmas. These skits are intended to lead to some lively and educational audience discussions. You will walk away from this session with a better understanding of the ASOPs, Code of Conduct and how to apply them when you face your own professional dilemmas. This session may provide attendees with Professionalism Continuing Education Credits.

    Moderators:

    Speakers:
    Kendall Williams, Country Financial
    Rebecca Williams, Manager - Data Analysis, North Carolina Rate Bureau
    Fanny Paz-Prizant, AVP and Actuary Personal Insurance, Fireman’s Fund Insurance Companies
    Ronald Kozlowski, Director, Towers Watson

Presentations:

R-1: The Actuary as an Expert Witness

The possibility that an actuary will need to testify in an administrative setting is something every actuary should be aware of. This session will discuss the various circumstances where an actuary may be called upon to provide expert testimony. The panelists will comment on their experiences and field questions from the audience.

    Moderators:
    Dr. David Appel, Director, Economics Consulting, Milliman, Inc.
    Speakers:
    Irene Bass, Consulting Actuary, Bass & Khury
    Paul Ericksen, Principal-Actuarial Consulting, ISO

Presentations:

R-2: Health Care Reform

In 2010, the Healthcare Reform Act was signed into law. This session will focus on the trends emerging from the law and the impact it is having on the medical malpractice marketplace. Panelists will discuss potential unintended consequences that may affect other lines of business. The session will cover the inflationary and demographic trends that are emerging towards employed physician status and the like.

    Moderators:
    Millie Lo, Actuary, MagMutual
    Speakers:
    Anne Petrides, Director, Towers Watson
    Laura Cali, Chief Actuary and Manager, Product Regulation, Oregon State Insurance Division

Presentations:
Presentation 1

R-3: Credit Scoring

The use of credit-based scores for determining insurance rates remains a controversial and unresolved issue. In this session, we bring together a proponent, an opponent, and a moderator who has dealt with insurance from both a regulatory and insurance company viewpoint. They will present their positions and provide an opportunity for the audience to hear and explore various positions on this issue. Birny Birnbaum, Executive Director of the Center for Economic Justice, will present consumer concerns about insurers' use of consumer credit information for underwriting and rating homeowners and auto insurance. Birny will also discuss risk classification issues beyond consumer credit information, including appropriate actuarial and public policy standards for evaluating the reasonableness of emerging risk classifications. John B. Wilson, Director of Insurance Analytics at LexisNexis Risk Solutions will present the advantages of using consumer credit information to underwrite and rate insurance policies. Michael Lamb, who dealt with insurance scores as a regulator and now is a neutral consultant, will serve as moderator. He will facilitate the discussion and posit panel-puzzling perspectives.

    Moderators:
    R. Michael Lamb, Principal, Michael Lamb LLC
    Speakers:
    Birny Birnbaum, Executive Director, Center for Economic Justice
    John Wilson, VP-Insurance Solutions, Equifax

Presentations:
Presentation 1
Presentation 2

R-4: Ask a Regulator

Each member of this panel of regulators will present a short overview of current issues and the rate regulation process in their state. "Hot Button" issues will be identified and discussed. A roundtable group discussion will follow, with audience participation strongly encouraged. The differences and the similarities in regulatory approach will be highlighted. In addition, panelists will comment on their experiences, and field questions from the audience.

    Moderators:
    Carl Sornson, Managing Actuary, NJ Department of Banking and Insurance
    Speakers:
    David Dahl, Casualty Actuary, Oregon State Insurance Division
    Thomas Botsko, Chief Property and Casualty Actuary, Ohio Department of Insurance
    Sarah McNair-Grove, Actuary, Alaska Division of Insurance
    Sharon Li, Senior Casualty Actuary, California Department of Insurance

Presentations:
Presentation 1
Presentation 2
Presentation 3

R-5: What Makes a Good Rate Filing?

The Council on Professionalism of the American Academy of Actuaries in the Applicability Guidelines for Actuarial Standards of Practice (2009) provide non-authoritative guidance that various ASOPs apply to the preparation of a rate filing. Each state has its own regulations and expectations regarding rate filing. Compliance with the appropriate ASOPs and with the state regulations and professional standards should result in a good rate filing. In this session, we will examine:

  • How to stay out of the bottom one percent of filings,
  • How to prepare a good professional rate filing, and
  • How to do both these things easily and efficiently.

A significant portion of this session may qualify as professionalism topics for continuing education requirements.

    Moderators:
    Thomas Hess, Assistant Actuary, Ohio Department of Insurance
    Speakers:
    Carl Sornson, Managing Actuary, NJ Department of Banking and Insurance
    Patrick Cobb, Senior Vice President, Swiss Re America Holding Corporation

Presentations:
Presentation 1
Presentation 2
Presentation 3

RR-1: Risk and Return Considerations in Ratemaking: Calculating the Profit Provision

After you have the projected loss costs and expenses, the final step in deriving the indicated premium is to load in the underwriting profit provision. But what is the right number? This session will supply not one, but several answers to that question. It will survey different approaches, from those mandated by regulators to those used by corporate pricing actuaries for internal profitability analysis. The assumptions and parameter selections for each method will be discussed and the sensitivity of results to key parameters will also be explored. The session will have a practical focus with an emphasis on clarifying basic concepts and highlighting key distinctions between different methods.

    Moderators:
    David Chernick, Consulting Actuary, Milliman, Inc.
    Speakers:
    Ira Robbin, Principal, P&C Actuarial Analysts, LLC

Presentations:
Presentation 1

RR-2: Risk Load/Cost of Capital for Property Cat: Reinsurer and Primary Insurer Perspectives

The panel will discuss how risk load and/or the cost of capital is considered in rates for property cat covers. This will be done from the perspective of a reinsurer and also from the perspective of a primary company. This session should be of interest to attendees that have direct insurance on property exposed to the potential of significant losses from catastrophe events.

    Moderators:
    David Appel, Principal and Director, Milliman, Inc.
    Speakers:
    Ronald Wilkins, Vice President and Corporate Actuarial Manager, Partner Re U.S.
    John Lower, Associate Actuary, Allstate Insurance Company

Presentations:
Presentation 1
Presentation 2

RR-3: Cost of Capital and Capital Attribution- A Primer for the Property Casualty Actuary

This session will provide a historical primer on the subject and address research past and current in the practical ways of reflecting the cost of capital in ratemaking. This primer will discuss aspects as developed by Merton-Perold, Myers-Read, Mango's asset share model, and the RMK procedures. Also considered will be current research as it relates to how actual capital, should perhaps be considered in tranches, based on the risk metrics considered. We have come a long way since using premium to surplus ratios of 30 years ago. Let's continue the evolution.

    Moderators:
    Robert Wolf, Head of Capital Modeling, ANV Insurance Services, US Inc.
    Speakers:
    David Ruhm, Vice President, Chief Actuary, First American Financial Corporation
    Glenn G. Meyers, Joint Risk Management Section Council

Presentations:
Presentation 1
Presentation 2

RR-4: Allocating Capital- A Hands on Case Study

A laptop is recommended for participation in this session. Join us for a hands-on technical session where the audience will be allocating capital to lines of business considering various methods and will be working in groups to make strategic decisions based on their respective results.

    Moderators:
    Robert Wolf, Head of Capital Modeling, ANV Insurance Services, US Inc.
    Speakers:
    Stephen D’Arcy, Robitaille Endowed Chair in Risk and Insurance, California State University Fullerton

Presentations:
Presentation 1
Presentation 2
Presentation 3

RT-1: Large Account Pricing

Large account pricing involves techniques and skills that are markedly different from those used to price broader books of business. At this roundtable, we invite you to join in a discussion about what it takes to be a large account pricing actuary or underwriter. What key skills or philosophies need to be adopted? What unique considerations are pertinent to individual account analyses? How should we think about exposure changes or credibility? Explore, share, debate, and learn about large account pricing in this session.

    Moderators:

    Speakers:
    Roger Atkinson, Senior Vice President, Swiss Re

Presentations:

RT-2: Small Companies: From Challenges to Opportunities

The grass on the other side might seem greener; such that bigger companies might have more resources, more history, more established processes, more data, etc. In a nutshell, small companies seemingly have less of everything when compared to big companies. Less of everything sometimes may lead to more challenges, but with every challenge comes an opportunity. In this roundtable session, we will share some of the everyday challenge of working in a small company, and you might be comforted in knowing that you are not alone in facing these challenges. We will also share some of the unexpected and exciting opportunities that were created due to these challenges. Representatives from all sizes of companies are welcomed as we would love to hear from all sides to find out whether the grass is indeed always greener on the other side!

    Moderators:

    Speakers:
    Millie Lo, Actuary, MagMutual

Presentations:

RT-3: Usage-Based Auto Insurance: Now or Never?

As the industry's appetite for usage-based insurance (UBI) grows, actuaries are challenged with making the business case for telematics, specifying technological requirements, and designing and deploying usage-based products. In this session we discuss operational considerations relating to UBI, including cost sustainability, infrastructure, and analytical approaches.

    Moderators:

    Speakers:
    Jared Smollik, Manager-Actuarial, Actuarial, Insurance Services Office, Inc.
    Jim Weiss, Manager-Actuarial, Insurance Services Office, Inc.

Presentations:

RT-4: Using Predictive Modeling Beyond Ratemaking (i.e., Product Management, Underwriting, Agency/Sales Management, etc.)

I have used predictive modeling to help market the most profitable segments of a book with the highest closing ratio, underwrite the least profitable, identify underperforming agents and reward most profitable agents, and for many other things across Homeowners, Auto, WC, and other lines. Let's share ideas about what you have or would like to use predictive modeling for and learn from each other.

    Moderators:

    Speakers:
    Sheri Scott, Actuary, Milliman, Inc.

Presentations:

RT-5: Business Analytics and its Implications for the Actuarial Profession

With the analysis of data increasingly used to select insurance risks, guide medical practice, promote wellness and workplace safety, detect waste, fraud, and abuse, select employees and sports team members, price consumer products, determine store layout and location, recommend books, movies, and even colleagues, friends, and spouses, "business analytics" is now part of the business and cultural mainstream. A related development is that "data scientist", a job category first envisioned over a decade ago by William Cleveland at Bell Labs, is viewed as one of today's most promising career paths.

What are business analytics and data science? How do they – or should they - relate to the actuarial profession? After discussing the semantic issues, the roundtable will do an informal SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of the impacts of business analytics and data science on actuarial science and the actuarial profession.

    Moderators:

    Speakers:
    Jim Guszcza, National Predictive Analytics Lead, Deloitte Consulting LLP

Presentations:

RT-6: Integrating Capital Model Risk Metrics into Pricing and Underwriting

Ironically, the challenges of building a robust economic capital model are often found to pale in comparison to those of embedding it in day-to-day decision-making. This session will explore the value and road-blocks to integrate model results into the pricing and underwriting process. The discussion will segue into a facilitation on the development of a multi-pronged strategy for broad buy-in across business units.

    Moderators:

    Speakers:
    Abbe Sohne Bensimon, Senior Consultant, Towers Watson

Presentations:

RT-7: Usage-Based Auto Insurance in the Current Market

Most major insurers are moving forward with implementation of usage-based insurance (UBI) products, and a number of smaller insurers are following suit. This session will focus on discussions of the pros and cons for current adoption of UBI and whether to move forward rapidly, begin a small exploratory pilot, or sit tight waiting for the product to mature.

    Moderators:

    Speakers:
    Robin Harbage, Director, Towers Watson

Presentations:

RT-8: Territorial Ratemaking

There is a wide range of approaches used in the development of territories and territorial ratemaking. This interactive session will provide an opportunity to share different approaches and discuss their advantages and disadvantages. Topics that may be touched on include both wind and non-wind territories, the use of third-party data such as census data, and the relative merits of zip code versus GIS based territories.

    Moderators:

    Speakers:
    Matt Chamberlain, Milliman, Inc.

Presentations:

RT-9: Looking for Profit in Homeowners Insurance

The discussion will center around the many issues that plague homeowners insurance, including weather issues, consumer pressures on pricing and claims coverage, regulatory constraints and the many regional challenges. The roundtable discussion will challenge the business cases for staying in the homeowners insurance market, and explore ways to respond to the myriad of challenges and improve the business value proposition of this volatile product.

    Moderators:

    Speakers:
    Gary Wang, Consulting Actuary, Pinnacle

Presentations:

RT-10: Challenges in Incorporating Weather Information into Insurance Pricing

In this roundtable, we will address the challenges that are faced when refining pricing to include detailed third party hazard information. Costs of additional data streams, underwriting buy-in, systems issues, and Insurance Department approval are examples of discussion topics.

    Moderators:

    Speakers:
    Howard Kunst, CoreLogic

Presentations:

RT-11: Training Future Actuaries: How can CAS members and academics engage to better prepare students?

Demand for the actuarial skill set remains high in the marketplace. It is critical that college and university actuarial science programs train future actuaries effectively and with a thorough understanding of the current and future needs of the profession. Additionally, it's important for experienced actuaries to provide insights to those educators to enable them to best prepare the students through practical examples of the skills we employ.

The CAS recently approved a framework for ongoing university engagement to help strengthen property/casualty knowledge at the post-secondary level. In this roundtable, we will discuss the recommendations and brainstorm additional ways for actuaries to engage with academics and students to provide hands on exposure to the field.

The ultimate goal of this roundtable is to strengthen the lines of communication and the working interrelationships between academics and practicing actuaries.

    Moderators:

    Speakers:
    Wesley Griffiths, Second Vice President and Actuary, Travelers Insurance

Presentations:

RT-12: Validating a Predictive Model

Model validation is a very important, though often-overlooked component of the predictive modeling process. In this roundtable, we will share ideas for how to go about the validation process. Possible topics of discussion include:

  • Measuring goodness-of-fit;
  • Avoiding over-fitting;
  • Determining the internal stability/robustness of a model;
  • Assessing model lift.

Though actuarial predictive modeling usually involves GLMs, this discussion is not limited to linear models.

    Moderators:

    Speakers:
    Dan Tevet, Actuarial Associate Senior, ISO Insurance Programs and Analytic Services

Presentations:

RT-13: Adventures in Rate Capping

As companies gain better understanding of their customers' sensitivity to price, more insurers are implementing Rate Capping programs. However, managing Rate Capping can prove difficult. Many of the challenges do not emerge until capping has been implemented and is in place for several years. In this roundtable discussion, we will discourse about the pros and cons of Rate Capping and the various challenges its use presents, such as its implications for rate indications, managing calendar year results, implementation, and data.

    Moderators:

    Speakers:
    Rich Ross, USAA
    Morgan Bugbee, Staff Actuary, Farmers Insurance Group

Presentations:

RT-14: Value-Based Pricing

What Do People Buy? It is a deceptively simple question: What are we getting paid for? Still, many businesses arrogantly assume they know what their customers want and believe they have been giving them exactly for years. This is a myopic vision, and potentially harmful. This roundtable will be a thought-provoking discussion, focusing on buying behaviors of consumers and businesses and their impact on the insurance industry.

    Moderators:

    Speakers:
    Ron Baker, Founder, VeraSage Institute

Presentations:

UBI-1: Commercial Usage-Based Insurance

Making the business case for a telematics application in commercial lines is easier than personal lines. Surprisingly, the majority of successful product offerings in the insurance industry are in personal lines. Nevertheless, commercial auto insurers are moving quickly to catch up with personal auto insurers. In this presentation, we will contrast personal and commercial lines needs. We will discuss UBI strategies that worked for personal lines and why they do not work in commercial lines. Finally, we will focus on how to build a strategy for your commercial UBI offering that is aligned with your customer needs and your company's long term goals.

    Moderators:
    Daniel P. Post, Vice President and Actuary, The Hartford
    Speakers:
    Mohamad Hindawi, Consultant, Towers Watson

Presentations:
Presentation 1
Presentation 2

UBI-2: Usage-Based Insurance Lessons Learned

This is a panel session with several UBI product owners from various insurance companies discussing the UBI business case and the challenges, pitfalls and lessons learned during implementation.

    Moderators:
    Robin Harbage, Director, Towers Watson
    Speakers:
    Randy Birchfield, Vice President-Auto Line Management, Allstate Insurance Company
    George Ayres, Vice President-Global Sales, Hughes Telematics, Inc.
    Jon Inquimboy, Product Manager-Usage Based Insurance, Esurance

Presentations:

UBI-3: Usage-Based Insurance from a Regulatory Perspective

This session will focus on usage-based insurance from a regulatory perspective, with speakers from the Ohio Department of Insurance and Towers Watson, a company that has filed a usage-based insurance driving score in several states.

    Moderators:
    Christopher McKenna, Consulting Actuary, Towers Watson
    Speakers:
    Katie DeGraaf, Consultant, Towers Watson
    Thomas Botsko, Chief Property and Casualty Actuary, Ohio Department of Insurance

Presentations:
Presentation 1

UBI-4: Integrating Telematics into Your Business and Rating Plans

The possibilities of usage-based insurance (UBI) are well-documented, but the business case is more elusive. Organizations entering the telematics arena are faced with a long and costly road to market, and a clear vision is required to make good on the possibilities. This session will focus on integrating UBI into existing business models, with a focus on the interactions between UBI and traditional rating plans. We will also consider different types of outcomes, both positive and negative, achievable at various levels of integration. Finally, we will discuss short-term uses of telematics in pricing, and common "speed bumps" along the path to longer-term use scenarios.

    Moderators:
    David Cummings, Vice President and Chief Actuary, ISO Innovative Analytics
    Speakers:
    Jim Weiss, Manager, Insurance Services Office
    Marty Epstein, Global Auto Actuary, AIG Property Casualty

Presentations:
Presentation 1
Presentation 2

UBI-5: The Right UBI Data for Now and the Future
Many insurance companies spend a considerable amount of time and energy building their UBI product and collecting data only to find that the data they have accumulated is inadequate. This session is focused on UBI data strategy, discussing how to determine the best level of data to collect, expectations for data quantity and common issues with data quality.

    Moderators:
    Kelleen Arquette, Consultant, Towers Watson
    Speakers:
    Lenard Llaguno, Consultant, Towers Watson
    Joe Griffin, Consultant, Towers Watson

Presentations:

UBI-6: From Data to Model

As more carriers launch and pilot UBI products, and various types of data are increasingly accumulated, questions are being asked about the kind of predictive models that can be developed given the data at hand:

  • Shall we develop a mileage-based or behavioral-based model?
  • Shall we use the full spectrum of the observations or opt for reduced forms based on counting over a threshold?
  • Shall we limit ourselves to GLM-type models or allow modeling based on machine-learning techniques?
  • How can we validate the potential models and choose between them?

This session will assess the predictive power of the various models and suggest practical tips for developing UBI programs that meet current time-to-market needs, but also provide longer term competitive advantage.

    Moderators:
    Wasim Chowdhury, Associate Actuary, Allstate Insurance Company
    Speakers:
    Oren Steinberg, CEO, Sensomatix
    Prof. Udi Makov, Head of Actuarial Research Center, University of Haifa

Presentations:

WC-1: Workers Compensation Ratemaking - An Overview

The panel will review the essential components of a typical rate filing from the perspective of NCCI, other bureaus, and from the view of companies in loss cost jurisdictions. The discussion will highlight coverages, exposure bases, and data sources used for workers compensation ratemaking.

    Moderators:
    Jay Rosen, Director and Actuary, National Council on Compensation Insurance, Inc.
    Speakers:
    Jay Rosen, Director and Actuary, National Council on Compensation Insurance, Inc.
    George Busche, Vice President-Product Management Leader, QBE North America

Presentations:
Presentation 1
Presentation 2

WC-2: Workers Compensation - Selected State Issues

The panel will present a summary of the key issues and challenges facing the workers compensation system in the states of California and Montana.

The WCIRB of California will provide an update of the California system in the very early months of the implementation of the major reform legislation that was passed in late 2012. In particular, the presentation will identify the issues that have given rise to recent combined ratio estimates that are approaching 140% and how those issues are being addressed by the reforms. For over a decade, Montana's workers compensation rates have been the highest in the western region. At January 1, 2010, Montana's rates were ranked the highest in the nation based on the Oregon Department of Consumer and Business Services biennial rate study. Diagnosing the underlying causes was a daunting challenge for the technical experts. Equally challenging was translating that analysis to specific legislative policy actions, in a highly charged political environment, that led to an estimated 22.4% reduction in loss costs.

This discussion will examine how well the major benefit reforms enacted by House Bill 334 addressed the underlying causes of Montana's high loss costs and the unique challenges created by these legislative reforms for actuarial rate and reserve indications going forward.

    Moderators:
    Dave Bellusci, Executive Vice President, COO & Chief Actuary, W.C. Insurance Rating Bureau of California
    Speakers:
    David Bellusci, Executive Vice President, COO and Chief Actuary, W.C. Insurance Rating Bureau of California
    Dan Gengler, Internal Actuary, Montana State Fund

Presentations:
Presentation 1
Presentation 2

WC-3: Workers Compensation - State of the Market

An overview of the current state of the workers compensation line will be presented, including a review of financial results, recent trends, and a discussion of where the line might be headed.

    Moderators:
    Tony DiDonato, Director and Senior Actuary, National Council on Compensation Insurance
    Speakers:
    Tony DiDonato, Director and Senior Actuary, National Council on Compensation Insurance
    Julia Stenberg, AVP and Actuary, CNA Insurance Companies

Presentations:
Presentation 1
Presentation 2

WC-4: Do Medical Fee Schedules Really Work?Evidence on Provider Behavior Reflected in Observed Changes in Medical Utilization and Severity as Well as the Prices Actually Paid

Quantifying the effects of changes to physician fee schedules in workers compensation has become an integral part of NCCI legislative pricing, as an increasing number of jurisdictions have introduced such legal provisions over the past decades. Indeed, understanding the dynamics of WC medical costs in response to market changes is critical to effective ratemaking for all workers compensation market participants.

The session will start with a discussion of the creation of a series of medical cost indexes (for fee schedule prices, prices actually paid, severity, and utilization) and offer evidence on how changes in actual medical prices paid depart from and may offset changes in the fee schedule itself. The analysis also provides evidence to evaluate the common belief that changes in utilization enable medical providers to further offset the direct impact of fee schedule changes. This analysis provides important insights into the dynamics of WC medical costs.

This will be followed by a discussion of the impact of the introduction of fee schedules in states where previously there were none. The introduction of fee schedules likely serves as a "shock" to the status quo in markets for WC medical services. The market reaction to such a shock is likely to differ in material ways from patterns observed once fee schedules are the norm. The medical index methodology presented in the first part of the session can also be used to assess the impact of the introduction of fee schedules in states that previously had no direct pricing controls. This analysis also requires the development of additional methods to estimate the cost trends that would have been observed if the fee schedules had not been introduced. The analysis indicates that fee schedules impact trends as well as levels of medical costs.

    Moderators:
    Harry Shuford, Chief Economist, National Council on Compensation Insurance, Inc.
    Speakers:
    Harry Shuford, Chief Economist, National Council on Compensation Insurance, Inc.
    Nathan Lord, Senior Actuarial Analyst, National Council on Compensation Insurance, Inc.

Presentations:
Presentation 1
Presentation 2

WC-5: Workers Compensation Predictive Modeling - A Case Study

The panel will review how predictive modeling was used to create a tiering structure to apply on top of an existing rating plan for a large WC carrier—with the goal of ultimately developing a process to improve the worst loss ratio segment of the carrier's book of business while at the same time increasing the market share of its best loss ratio segment. The presentation will include an overview of the entire process beginning with the initial analysis of the carrier's book of business through the development of the final tiering structure applied at the policy level as the policy is sold. The panel will also review underwriting, sales, and operational improvement opportunities uncovered throughout the review.

    Moderators:
    Guy Avagliano, Consulting Actuary, Milliman, Inc.
    Speakers:
    Guy Avagliano, Consulting Actuary, Milliman, Inc.
    Sheri Scott, Consulting Actuary, Milliman, Inc.

Presentations:

Workshop 1: Part I: Climate Change Panel

We will kick off the Severe Weather Workshop with apanel discussion led by the Chair of the CAS Climate Change Committee. Top meteorological experts will share their perspectives on Climate Change, focusing on the impacts to the insurance industry. This will set the stage for the rest of the day as we learn techniques for pricing for severe weather events.

    Moderators:
    Daniel P. Post, Vice President & Actuary, The Hartford
    Speakers:
    Vijay Manghnani, Analytics and Exposure Officer, AIG
    Peter Dailey, Vice President and Director-Atmospheric Service, AIR Worldwide
    Kyle Beatty, Vice President Business Solutions, Atmospheric and Environmental Research, Inc.

Presentations:
Presentation 1
Presentation 2
Presentation 3
Presentation 4
Presentation 5

Workshop 1: Part II: Overview of Traditional Methods for Incorporating Weather Activity in Rates

Property insurance results can be volatile due to the catastrophic nature of the risk involved. The hurricane peril is typically a major risk for many property insurance companies; however, in recent years, events like wildfires and tornadoes have been more prevalent than in the past, threatening to wipe out any potential profit and increase the chance for insolvency. This session will describe how insurance companies account for these previously non-modeled catastrophes within their pricing methodology. In particular, methodologies that organize data into catastrophe versus non-catastrophe events or weather versus non-weather events and the associated advantages and disadvantages of each will be discussed.

    Moderators:
    Shantelle Thomas, Senior Actuary, Allstate Insurance Company
    Speakers:
    Jamie Mills, Associate Actuary, Allstate Insurance Company

Presentations:
Presentation 1

Workshop 1: Part III: Hurricane Modeling

As the state of scientific research around the effect of climate change on hurricane behavior continues to evolve, the insurance industry has an ever increasing need to be informed. Probabilistic hurricane models have several ways of representing the uncertainty in hurricane frequency, including the use of multiple forecasts. This session will discuss how RMS uses the Medium Term Rate Forecast to provide additional insight to the ever changing landscape of hurricane risk.

    Moderators:
    Shantelle Thomas, Senior Actuary, Allstate Insurance Company
    Speakers:
    Matthew Nielsen, Director-Model Product Management, RMS

Presentations:
Presentation 1

Workshop 1: Part IV: The Frequency of Severe Weather Events

Although developing and validating the severity aspects of catastrophe models is a critical area with its own challenges, establishing the appropriate frequency for each stochastic event and the appropriate arrival model is probably at least as critical and challenging. This session will explore some of the key concepts and latest developments in the modeling of the frequency of severe weather events, including event frequency distributions and their derivation from historical data; spatial and temporal clustering; the development of near term frequency models; and supplementing the historical record through the use of numerical weather modeling to derive event frequency information.

    Moderators:
    Daniel P. Post, Vice President & Actuary, The Hartford
    Speakers:
    David F. Smith, Senior Vice President, EQECAT

Presentations:
Presentation 1

Workshop 1: Part V: Blending Historical Data and Models

Severe thunderstorms have affected many parts of the country recently, sometimes causing extensive tornado and hail damage. This session will discuss the latest science behind tornado/hail/thunderstorm modeling. It will consider how historical experience and catastrophe models can complement each other, specifically giving an example of blending historical data with model results.

    Moderators:
    Daniel P. Post, Vice President & Actuary, The Hartford
    Speakers:
    David Lalonde, Vice President & Actuary, The Hartford

Presentations:
Presentation 1

Workshop 1: Part VI: Model Blending

Given the events of the past several years, the development of "custom" views of catastrophe risk through adjusting, or blending, output from multiple catastrophe models has become increasingly common among insurance companies. The benefits of this approach include: modeled results that better reflect a company's actual claims experience and reduced model risk from no longer relying on a single vendor model. This session will briefly discuss vendor catastrophe model validation techniques and then describe several methods, from simple to complex, for adjusting catastrophe model output to develop a "custom" view of catastrophe risk.

    Moderators:
    Shantelle Thomas, Senior Actuary, Allstate Insurance Company
    Speakers:
    Adam Troyer, Senior Actuary, Allstate Insurance Company

Presentations:
Presentation 1

Workshop 1: Part VII: Using Cat Bonds to Develop Risk Loads

The volume of Insurance Linked Securities (ILS) available in the capital markets is growing. Catastrophe Bonds are one form of ILS. In this interactive session, available Catastrophe Bond data from the capital markets will be used to quantify the cost of catastrophe risk for property insurance. Several applications will be presented, including quantifying risk loads and evaluating the cost of catastrophe reinsurance.

    Moderators:
    Daniel P. Post, Vice President & Actuary, The Hartford
    Speakers:
    David Chernick, Consulting Actuary, Milliman, Inc.
    Paul D. Anderson, Consulting Actuary, Milliman, Inc.

Presentations:
Presentation 1
Presentation 2

Workshop 1: Part VIII: Location Level Pricing

Although the use of catastrophe models has been widely adopted in the industry, the literature contains relatively little on how to use catastrophe model output to construct a rating plan. In practice, the pricing of this peril is often based on Average Annual Loss by territory, with territorial definitions that do not adequately differentiate risk. Class factors may be determined without consideration of correlation among them or between class factors and territory. This session will consider a more sophisticated method by describing in detail an approach to constructing a pricing structure by performing a multivariate analysis using cat model output combined with Geographic Information Systems (GIS) data. It will include discussion of how to construct territories appropriate for the hurricane peril, how to construct base rates and class factors, and the limitations of this approach.

    Moderators:
    Daniel P. Post, Vice President & Actuary, The Hartford
    Speakers:
    Matthew Chamberlain, Vice President and Actuary, The Hartford
Workshop 2: Part I - Actuarial Predictive Modeling in R: GLM Foundations

The first phase of the workshop will impart a working intuition for Generalized Linear Models. The approach will begin with familiar ideas from Ordinary Least Squares [OLS] regression and point out the various ways in which the GLM paradigm generalized OLS. By the end of the session, students should feel comfortable with such topics as selecting link functions, making distributional assumptions (including Poisson, logistic, Gamma, and Tweedie), and specifying weights and offsets. Additional topics will include grouped data, nonlinear transformations, and spline regression. Various small "textbook" case studies will be conducted in R along the way to illustrate the concepts as well as build facility with the software.

    Moderators:
    James Guszcza, National Predictive Analytics Lead, Deloitte Consulting
    Speakers:
    Steven Berman, Specialist Leader, Deloitte Consulting LLP

Presentations:

Workshop 2: Part II—Actuarial Predictive Modeling in R: Variable Selection and Model Validation

This session continues the transition from discussing the mathematics of modeling to illustrating the methodology of modeling. Once the model design basics are in place, a major challenge is to select an appropriate set of variables for inclusion in the model. This session will introduce variable selection, variable testing, and model validation concepts that will be fleshed out more fully during the personal auto case study. Topics covered will include graphical analysis of model fit; QQ plots; residual analysis; and Analysis of Deviance and F-tests. Model validation will also be discussed from a complementary statistical learning point of view, with emphasis on topics such as lift curve analysis, the bias-variance trade-off, and cross-validation.

    Moderators:
    James Guszcza, National Predictive Analytics Lead, Deloitte Consulting
    Speakers:
    Steven Berman, Specialist Leader, Deloitte Consulting LLP

Presentations:

Workshop 2: Part III—Actuarial Predictive Modeling in R: Personal Auto Case Study

The final phase of the workshop will be a personal auto predictive modeling case study. Topics covered/re-emphasized will include converting a business problem into an appropriate model design; data preparation; the "level" of analysis; target variable specification; GLM-based modeling of frequency, severity, and pure premium; missing values; Graphical Exploratory Data Analysis; types of predictive variables; variable selection; variable transformation; multicollinearity; interpreting model parameters; interpreting model diagnostic output; nested model comparison; and evaluating model segmentation power. Classification and Regression Trees and Multilevel/Hierarchical models, will be discussed and illustrated as time permits.

    Moderators:
    James Guszcza, National Predictive Analytics Lead, Deloitte Consulting
    Speakers:
    Steven Berman, Specialist Leader, Deloitte Consulting LLP

Presentations:

Workshop 3: Part I— Niche Identification

During this session participants will learn key elements of niche identification. Facilitators will explore how developing a new product is often about identifying an underserved niche or finding ways to attract risks more likely to be profitable.

    Moderators:
    Kelly McKeethan, Vice President-Senior Pricing Actuary, Bank of America
    Speakers:
    Robin Harbage, Director, Towers Watson

Presentations:
Presentation 1

Workshop 3: Part II— Data Gathering

Understanding your data is very important. It will dictate your ability to understand the profitability of the product, as well as market potential. Participants will explore various topics including starting from scratch vs. mimicking a competitor, learning what data sources are available and how you can get your hands on them.

    Moderators:
    Kelly McKeethan, Vice President-Senior Pricing Actuary, Bank of America
    Speakers:
    Brett Nunes, Senior Consultant, Towers Watson

Presentations:

Workshop 3: Part III— Product Design

Attendees for this session will explore the different considerations for the product design. Panelists will cover elements of pricing, claims, legal, marketing, operations, and IT.

    Moderators:
    Kelly McKeethan, Vice President-Senior Pricing Actuary, Bank of America
    Speakers:
    Robin Harbage, Director, Towers Watson

Presentations:
Presentation 1

Workshop 3: Part IV— New Product Approval Process

New products are important to an orgainzation's continued growth and marketplace relevance. What processes and governance should companies consider in terms of approving new products? What role, if any, do senior management and the board have in shaping and bringing forth new products? Speed to market is not always a predictor of success in managing products. This session will provide a perspective on how to achieve speed to profit through effective project selection, prioritization, and execution. We will also discuss the factors that contribute to success in launching new products and leading practices based on research and practical experience.

    Moderators:
    Kelly McKeethan, Vice President-Senior Pricing Actuary, Bank of America
    Speakers:
    Kelly Cusick, Senior Manager, Deloitte Consulting LLP

Presentations:
Presentation 1

Workshop 3: Part V—Regulation

Depending on the products, the regulatory concerns can be substantial. During the session, key questions and how their answers affect filing strategy, will be discussed. For example, is the company making a new filing or revising a current one? What is the impact on existing customers? Will the change improve the potential for more customers to be written, thus reducing state pools? How were rates substantiated?

    Moderators:
    Kelly McKeethan, Vice President-Senior Pricing Actuary, Bank of America
    Speakers:
    Patrick Causgrove, Vice President-Senior Pricing Actuary, Bank of America

Presentations:
Presentation 1

Workshop 3: Part VI— Marketing
If a tree falls in the forest but no one hears it, does it make a sound? Likewise, if a product is designed but doesnt get to market, has a product been developed? Participants will discuss marketing issues and ways to measure marketing effectiveness.
    Moderators:
    Kelly McKeethan, Vice President-Senior Pricing Actuary, Bank of America
    Speakers:
    Kelly McKeethan, Vice President-Senior Pricing Actuary, Bank of America

Presentations:
Presentation 1

Workshop 3: Part VII— Product Monitoring

After the product has been designed and is being sold in the marketplace, our focus needs to turn to its performance. Participants will discuss early indicators of a new products success.

    Moderators:
    Kelly McKeethan, Vice President-Senior Pricing Actuary, Bank of America
    Speakers:
    Kelly McKeethan, Vice President-Senior Pricing Actuary, Bank of America

Presentations:
Presentation 1

Workshop 4: Part I - Introduction to R

This workshop will focus on the practical issues involved in using R in typical types of actuarial analysis and beyond. In addition to mastering the fundamentals of R, attendees will practice working with various packages related to common actuarial work, reading and exporting data to and from R, building predictive models, as well as using R for loss development.

The morning session will cover the following topics:

  • Basics of R (data loading, command structure)
  • Importing and Exporting Data and Results to and from R
  • Data Exploration
  • Graphing

Participants are expected to bring their own laptop to the workshop. Instructions will be sent prior to the workshop on installing R and related packages. Some minor preliminary work will be required in order to maximize our time during the workshop.

Participants are encouraged to bring their own data sets to use during the workshop.

    Moderators:
    Lee Bowron, Kerper and Bowron LLC
    Speakers:
    Lee Bowron, Member/Manager LLC, Kerper and Bowron LLC
    Adam Rich, Actuary, Beazley Group

Presentations:

Workshop 4: Part II - Introduction to R

The afternoonsession will be a continuation of the morning session and will cover the following topics:

  • Chain Ladder package
  • Predictive Modeling
    Moderators:
    Lee Bowron, Kerper and Bowron LLC
    Speakers:
    Lee Bowron, Member/Manager LLC, Kerper and Bowron LLC
    Adam Rich, Actuary, Beazley Group

Presentations:

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On-Demand Continuing Education Credit

The CAS Roundtable

Posted on 10/25/2017
By Erin Olson

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