Product Development Workshop Part 7: Monitoring and Risk Management Strategies
Learn about the importance of subjective and objective metrics in monitoring product success and managing risks. Identify key early predictors, conduct portfolio analysis, and understand the significance of internal and external feedback. Gain insights on how to measure competitiveness, customer characteristics, and the impact of new processes on losses and revenue. Join the 2012 CAS RPM Seminar for valuable strategies and case studies.
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Presentation Transcript
Product Development Workshop Part 7: Product Monitoring/Risk Management 2012 CAS Ratemaking and Product Management Seminar March 19, 2012 Kelly McKeethan, FCAS, MAAA, CPCU 1 Proprietary & Confidential
Product Development Workshop Part 7: Product Monitoring/Risk Management Outline Subjective Metrics Internal External 3 Objective Metrics Early Predictors Portfolio Analysis Losses Premiums Expenses 4-5 Other Metrics Group Discussion 5 Case Study Other Examples 6-7 7 2012 CAS RPM Seminar - March 19, 2012 2 Proprietary & Confidential
Product Development Workshop Part 7: Product Monitoring/Risk Management Subjective Metrics Good predictor of success do you have buy-in from the staff? Sales Service Marketing Other Functional Areas - all need to be considered in product design New product usually means new processes , especially if a modification to an existing product need everyone on board External Buy-In key customers Once again, need to consider in product design Both Internal and External important to capture feedback immediately after product launch what happens after the theoretical is translated into reality More soft and fuzzy than hard numbers, but still critical to gauge 2012 CAS RPM Seminar March 19, 2012 3 Proprietary & Confidential
Product Development Workshop Part 7: Product Monitoring/Risk Management Objective Metrics Early Predictors 1. Win Rate on Quotes early indicator of competitiveness and rate adequacy 2. Portfolio Analysis (Profile of Business) Distribution of business by key variables Geography Limits Customer Age Credit Score Important - customer characteristics drive loss and revenue exposures Retention important component if existing book is being converted to new product compare portfolio analysis of existing book post- conversion vs. pre-conversion good measure of impact on adverse selection Losses Analyze reported losses as early as possible first indicator of experience Compare with expected losses need to consider timeframe e.g. calendar year, accident year, report year, etc. Claim approval/denial rates measure impact of new processes 2012 CAS RPM Seminar - March 19, 2012 4 Proprietary & Confidential
Product Development Workshop Part 7: Product Monitoring/Risk Management Objective Metrics (continued) Revenue impacts expense ratio compare average premium to plan Expenses Underwriting Time spent on new processes verification of new rating variables Manual Re-Rating due to errors Marketing Sales talk time will increase if more information is needed to rate product Service talk time Time spent re-issuing policies due to errors Finance need to properly account for new product IT Actuarial Time spent on verification of rate accuracy Opportunity Cost how many rate filings are not made due to time spent on rate checking quantifiable Group Discussion Above Items Others? 2012 CAS RPM Seminar - March 19, 2012 5 Proprietary & Confidential
Product Development Workshop Part 7: Product Monitoring/Risk Management Case Study Background Small Personal Auto Insurer Replaced Traditional 3-Tier Product with 15-Tier Product Implemented on Platform developed by outside vendor replaced Legacy system Rolled out an initial state and then a few states/month Results Subjective Metrics Internal all areas participated in product design Process Design internal areas made desires known - not all were implemented - give and take Made decision to go live when estimated that 80% of items in manual were working- wtd avg Shortfall didn t give as much weight to operational impact as we should have External did not conduct focus group surveys 2012 CAS RPM Seminar - March 19, 2012 6 Proprietary & Confidential
Product Development Workshop Part 7: Product Monitoring/Risk Management Case Study (continued) Results Objective Metrics Profile of New Business similar to expected Losses very well-managed loss ratios dropped Premium Volume suffered Retention was very low more a matter of the new processes than of the new product many errors in premiums that were sent to customers Expense Ratio climbed as premium dropped Opportunity Cost entire actuarial department spent 6 months checking rates lost revenue Comments? Other Experiences? 2012 CAS RPM Seminar - March 19, 2012 7 Proprietary & Confidential
