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1999 CAS RATEMAKING SEMINAR Product Development (MIS - 32)

1999 CAS RATEMAKING SEMINAR Product Development (MIS - 32). Ron Latva. Personal Lines Differences. Price-sensitive and price-driven purchase Coverages similar across carriers Fewer forms differences than commercial lines More issues with regulations and filings. Assumptions for Today.

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1999 CAS RATEMAKING SEMINAR Product Development (MIS - 32)

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  1. 1999 CAS RATEMAKING SEMINARProduct Development(MIS - 32) Ron Latva

  2. Personal Lines Differences • Price-sensitive and price-driven purchase • Coverages similar across carriers • Fewer forms differences than commercial lines • More issues with regulations and filings

  3. Assumptions for Today • Need identified: • Develop new personal auto product to price for a wider segment of the market than the traditional multi-company approach • Team work! • Include people with expertise in pricing, forms, filings, regulatory issues, systems, data, statistical, agency relationships, and training • The team should be involved in and informed of all aspects of the project • Presented from viewpoint of actuary (pricer)

  4. Steps in Product Design and Development • Market research • Competitive analysis • Determine rates/rules/forms • Filing preparation • Internal implementation • Training needs • Marketing/sales plans • Monitoring/tracking

  5. Market Research • Complete before doing any design work • Competitors • Who are they? • What do they do well and not so well? • Regulatory environment • Review on countrywide basis • Customers • Agents • Insureds

  6. Competitive Analysis • Pricing/rating review • Review rate competitiveness across variety of risks • Choose different target companies based on market segment, territory, or other variables • Market basket approach • Non-pricing/rating review • Underwriting guidelines • Coverage differences • Marketing messages

  7. Determine Rates/Rules/Forms • Base rates • Own data • Competitors • Rating methodology • Additive v. Multiplicative • Flat dollar v. Percentage • Rating relativities • Use own data for current variables (territory) • Use competitor information for new factors

  8. Determine Rates/Rules/Forms • Discounts/surcharges • Based on own data, competitors, target market • How will the data be collected, validated, and updated? • Forms/coverages • Match coverage forms to product definition • Need to involve legal department • Determine appropriate coverages and limits for target market • Eligibility • Underwriting guides should match pricing and target risks

  9. Filing Preparation • Understand state regulations and statutes • Know what is and is not allowed for rates and rules • Understand approval process • Complete filing • Follow DOI specifications • If new state, follow a respected competitor • Work with department of insurance • Especially with innovative coverages, discounts, or rating plans

  10. Internal Implementation • Systems • Statistical needs • Data needs • Manuals/forms • Other printed materials

  11. Training Needs • Internal needs • Systems • Sales/customer service • Other home office personnel • Other actuaries • External needs • Agents • Customers • Insurance departments

  12. Marketing/Sales Plans • What is the target market of the product? • This understanding is key to sales success! • Is pricing appropriate for the target market? • What is impact of sales goals on results? • Short-term and long-term • Top line and bottom line

  13. Monitoring/Tracking • Short-range analysis • Book of business analysis • New business counts • Frequency analysis • Long-range analysis • Overall rate level • Specific target segments and overall classification system • Credit/discounts

  14. Monitoring/Tracking • Need to develop methodology for monitoring before introducing product to marketplace • Fine-tuning is necessary • It won’t be right the first time! • Important to long-term success • On going review • Constant refinement of product

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