Transcript Insurance Services

© 2009 ISO Services, Inc.
Insurance core fundamentals and world-class analytics:
Processes and tools to evaluate and manage risk
March 2009
Presented by: Insurance Services Office (ISO)
for the Brazil insurance market at Federação Nacional de Seguros
Gerais (Fenseg)
Hosted by: EasyWay Consulting (EWC)
Global general insurance industry outlook
Surviving and thriving as an insurer requires
unwavering focus on core fundamentals of the business
 Pricing
 Underwriting
 Loss adjudication
 Risk assessment and management
But even insurers who stress the fundamentals will need the
edge obtainable only by applying world-class analytics to
large volumes of high-quality data
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© 2009 ISO Services, Inc.
About Insurance Services Office (ISO)
Information and industry expertise to help our customers
measure, manage and reduce risk
• ISO is a leading source of information about risk
• We provide comprehensive data, leading-edge analytics,
and decision-support solutions and services to:
 Insurance industry and its regulators
 Government
 Healthcare industry
 Mortgage industry
• ISO is the premier source of information, products, and
services related to property and liability risk
We provide value to our customers by leveraging analytic
capabilities with proprietary and public data
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© 2009 ISO Services, Inc.
About ISO
• Formed in 1971 as not-for-profit advisory and rating
organization for U.S. general insurance industry
• Conversion to for-profit status in 1997; privately held.
• 3,600+ employees—advanced degrees, professional
designations, certifications in a variety of fields
• Headquartered in Jersey City, New Jersey, U.S.A., with
offices throughout the world
 North America and the Caribbean
 London & Hamphsire, UK
 Munich, Germany
 Beijing, China
 Hyderabad, India
 Tel Aviv, Israel
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© 2009 ISO Services, Inc.
About ISO
ISO maintains the world’s largest databases on
insurance premiums, losses and claims
ISO’s unique data sets include:
• Over 14 billion records in ISO’s statistical databases
• More than 600 million general insurance claims in U.S.
fraud database
• Historical natural catastrophe data covering more
than 50 countries
• Data from more than 13 million U.S. mortgage loans
• 3 million U.S. properties in the Specific Property
Information database
• 65+% market share in coverage verification database
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© 2009 ISO Services, Inc.
About ISO
Statistical Agent Services
• ISO serves as a vital resource and trusted intermediary to
the insurance industry and its regulators
• As a statistical agent
• ISO collects premium and loss experience from insurers
and reports statistics to state regulators
• ISO processes data for more than 1,800 insurers
• ISO has successfully leveraged that position to offer a
variety of data services to insurers
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© 2009 ISO Services, Inc.
About ISO
Information on Specific Properties and Communities
• On-site surveys of individual properties
• Loss/risk costs for specific properties
• Evaluation of communities’ fire suppression
capabilities
• Evaluation of communities’ building-code
enforcement
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© 2009 ISO Services, Inc.
About ISO
Claims Solutions
• We provide a wide variety of tools to help insurers at
every step of the claims process including expert
systems for fraud detection
• ISO developed and maintains ISO ClaimSearch®, the
general insurance industry's first and only
comprehensive solution for improving claims processing
and fighting fraud
• Experience working with the global insurance
community to develop customized, comprehensive antifraud solutions.
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© 2009 ISO Services, Inc.
About ISO
• For a broad spectrum of commercial and personal lines of
insurance ISO provides data, analytics and decision support
products, including:
 actuarial, underwriting and claims information and analyses
 statistical services and data processing
 policy language and rules
 information about specific properties/locations
 claims solutions and fraud identification tools
 consulting and technical services
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© 2009 ISO Services, Inc.
ISO’s Approach to Risk Analysis
Helping customers to better understand and manage risk
ISO
Observe and
characterize
loss
Determine
causality/
correlation
Predict
future loss
Customers
Tools to
manage risk
• Determine
• Apply domain • Use predictive • Provide data,
classifications
expertise
models and
analytics, and
of risk
analytical tools decision-support
• Utilize statistical
on aggregated
solutions
• Aggregate data and actuarial
data
from various
analyses
• Support
sources
• Evaluate impact individual and
• Determine
of external
portfolio risk
• Review
predictive
factors
decisions
historical
correlations
patterns
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Take actions
on risk
• Avoid
• Retain/mitigate
• Retain/reserve
• Transfer/price
© 2009 ISO Services, Inc.
Agenda – Part 1
• Data as a Corporate and Strategic Asset
• ISO Data Collection and Statistical Services
• ISO Policy Form Development
• Value to the Industry, Government and the Public
• Additional Services
– Fire Protection
– Community Mitigation
– Healthcare
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© 2009 ISO Services, Inc.
Data – A Corporate Asset
• Data, like all corporate assets, requires
managing to ensure the maximum benefit
is achieved by the organization
• Well-managed, high-quality data aids good
corporate governance by providing
management with a cohesive and objective
view of an organization's activity and
promotes data transparency
• Poorly managed data can result in faulty
business decisions
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© 2009 ISO Services, Inc.
Data – A Strategic Asset
Data supports corporate decision-making
– In providing a cohesive and objective view
of corporate activities
– In viewing the external landscape
– In predicting the future
– In identifying process improvements and
other efficiencies
– In measuring results
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© 2009 ISO Services, Inc.
The Value of Aggregate Data
Data aggregated across insurers ensures
proper pricing:
• Premium and loss data must be accurately
gathered across class, territory and coverage
in large enough samples
• Reliable, credible aggregate information will
enable companies to enter new markets
• Accurate loss development assists projection
of future costs
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© 2009 ISO Services, Inc.
The Value of Aggregate Data
Availability of aggregate data ensures
competition and stability of market by:
• Insurers have information to expand market
share and price adequately and fairly
• Policyholder benefits from increased
competition of entry of new insurers
• Helps the regulator monitor the market,
ensure rates are not unfair, discriminatory or
excessive
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© 2009 ISO Services, Inc.
Data – ISO Objectives
• Preserve and expand data collection, data
quality, data management role, premiere
statistical agent, trusted intermediary between
customers and government
• Develop advisory loss costs
• Develop analytics, tools, analysis, industry
communications, customized solutions,
decision-making products
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© 2009 ISO Services, Inc.
Data - Financial vs. Statistical Data
Financial Data:
Statistical Data:
• Accounting information
• Detailed premium and
with no matching of
premiums and losses
loss information on
individual policies
• Usually summarized
• Lacks detail and
granularity to evaluate
rates
• Snapshot in time
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• Usually transactional
• Historical data provides
picture of past costs
and anticipates future
costs
© 2009 ISO Services, Inc.
Data – ISO Statistical Services
• Leading collector of detailed property and casualty
insurance premium and loss statistical data in the
US since 1971, predecessor organizations date
back over 140 years
• Licensed/appointed statistical agent for 50 states,
District of Columbia and Puerto Rico, report
required statistics to state regulators on behalf of
companies, meets regulators requests for special
calls for data
• Over 800 statistical filings annually
• Strong emphasis on data quality measurement
and improvement
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© 2009 ISO Services, Inc.
Working With Regulators
• State-based regulation in the US
• Regular and special data compilations
provided
• No company-specific data released
unless require by regulation company
is notified by ISO
• Examinations
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© 2009 ISO Services, Inc.
Statistical Data Volume
• Each year 22,000 submissions
• Containing 2 billion detailed records of
premium, paid and outstanding loss
transactions
• At any one time, ISO data center stores
over 14 billion records
• Over 1,800 reporting insurers
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© 2009 ISO Services, Inc.
Data Collection Systems and
Processes
• First step—need for data
– Business
– Regulatory
• Development and maintenance of statistical plans
• New data element
– Insurer system evaluation
– ISO system evaluation
– Costing
– Homogeneity of Definition
– Method of Capture
– Timeliness
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© 2009 ISO Services, Inc.
Data Review – Best Practices
• As early as possible in process
• As automated as possible
• Efficient use of resources
• Fully documented
• Communicated to all users
• Balance thoroughness, materiality,
timeliness
• Objective vs. subjective criteria
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© 2009 ISO Services, Inc.
Security of Information
• By-laws: data treated as confidential
• No proprietary data disclosed
• Aggregate data reviewed to ensure no
proprietary data is obvious
• TruSecure Perimeter certified—independent
evaluation by the TruSecure Corporation on
its set of Essential Practices
• Internal access to data restricted—
electronically and physically
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© 2009 ISO Services, Inc.
ISO Standard Policy Forms
Standard policy forms and language
bring clarity
• Consumers understand coverages
• Clarity/uniformity if court cases/disputes arise
• Insurers can still vary from ISO standard
• Overall, value to insurers, consumers and
regulators in understanding coverages
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© 2009 ISO Services, Inc.
Policy Form Revisions
Mandated changes:
• Laws
• Court cases
• Insurance department regulation
Market changes:
• Societal trends
• Insurer needs
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© 2009 ISO Services, Inc.
Legal Review and Other Product Impact
• Law Department:
– reviews proposed policy language for legal sufficiency
• Business needs of insurers are balanced with legal
compliance concerns
• Readability
• Policy language consistency:
– within forms
– between lines of business
• Some mandated changes impact forms, rules and
pricing
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© 2009 ISO Services, Inc.
Market Changes
ISO keeps forms and rules state-of-theart and current based on input received
from many sources:
• Insurers
• Agent associations
• Regulators
• Staff research and societal trends
• Other industry sources
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© 2009 ISO Services, Inc.
Value and Benefits
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•
•
•
Generally, services offer economies of scale
•
•
File on insurer’s behalf
•
Rely on ISO for maintenance: compliance tracking and forms compliance
and adherence
•
Consistent, court-tested language
•
Industry expert input and feedback
•
Regulatory concerns are dealt with during ISO’s filing/approval process
Customers pay a fraction of the cost of the services
Allows insurers to make their own informed, intelligent decisions regarding
the coverage they provide and the prices they charge
insurers are free to deviate as they deem appropriate
© 2009 ISO Services, Inc.
Fire Protection Services
• Property-specific rating and underwriting
information for residential and commercial
properties
• Information on approximately 2.7 million
commercial buildings, approximately 4.5
million individual businesses in those
buildings
• More than 600 professionals observe and
report on conditions
• Value--Understand, quantify, underwrite,
mitigate and avoid potential loss
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© 2009 ISO Services, Inc.
Community Mitigation
• Community firefighting capabilities
• Used by nearly every US property insurer
• Evaluate fire-protection services for more than
46,000 fire response jurisdictions
• Effectiveness of community enforcement of
building codes
• Supplement with third-party data—information on
hazards
• Value—analytic measures of ability of communities
to mitigate losses from important perils
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© 2009 ISO Services, Inc.
Healthcare
• Solutions that help claims payors detect fraud,
abuse and overpayment using computer-based
models and profiling of claims
• Analyze patterns of claims produced by individual
physicians, physician practices, hospitals, dentists
and pharmacies
• Web-based reporting tools to provide the
documentation that helps to identify, investigate
and prevent abuse and fraud
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© 2009 ISO Services, Inc.
Agenda – Part 2
ISO Claims Solutions Overview
• Anti-fraud systems:
– US
– International markets
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© 2009 ISO Services, Inc.
ISO Claims Solutions
We provide a wide variety of integrated tools to help insurers
at every step of the claims process
• Expert systems for fraud detection, claims scoring,
managing bodily injury claims and data mining
• ISO's claims-management, analysis, investigations, and
support services can help insurers
– improve and streamline workflow
– increase service, productivity, and profitability
• At the core of our claims services is ISO ClaimSearch®, the
general insurance industry's comprehensive system for
improving claims processing and fighting fraud.
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© 2009 ISO Services, Inc.
Fraud Detection
ISO ClaimSearch is the industry’s only all-claims database –
and platform for integrated claims and investigations support
products
• The US system represents the merger of the industry’s leading
claims databases for property, casualty, and auto insurance
• US database contains over 600 million claims in all lines of
business
• Customized anti-fraud systems developed for international
markets
• Provides analytical tools and serves as a gateway to
supplementary data needed for analysis and investigations
• Accomplishes regulatory reporting for participants
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© 2009 ISO Services, Inc.
ISO ClaimSearch
The industry’s main line of defense against fraud
• The system furnishes essential data for
 researching prior-loss histories
 identifying claims patterns
 detecting suspect claims
• Participating insurers submit reports on individual insurance
claims
• Reports are stored in a single database
• ISO works with multiple constituents to identify fraud and
mitigate or completely eliminate the payment of fraudulent claims
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© 2009 ISO Services, Inc.
ISO ClaimSearch Constituents
Claims
Adjusters
Special
Investigation
Units (SIU)
Senior
Executives
National
Insurance
Crime Bureau
(NICB)
Law
Enforcement
Strategic
Partners
Government
Citizens
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© 2009 ISO Services, Inc.
ISO ClaimSearch
US Participation by Business
• Insurers representing over 92% of direct written premium;
over 1,800 insurers, 450 TPAs, 600 self-insureds
– Public organizations – transit authorities, municipalities,
hospitals, etc.
– Private organizations of all sizes in all industries – Fortune 500
companies: retail, transportation, hospitality, etc.
• State workers compensation insurance funds
• Disability insurance writers
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For Internal Use Only
© 2009 ISO Services, Inc.
ISO ClaimSearch
For Internal Use Only
Database Size – by Claim Type
Casualty
> Workers Compensation
> Automobile Liability
> Medical Payments
> Personal Injury Protection
> Auto Medical Payments
> Homeowner’s Liability
> General Liability
246.0 million
Auto
Property
> Homeowners
> Farm Owners
> Fire
> Allied Lines
> Commercial
82.2 million
> Theft Claims
> Theft Conversions
> Damage estimates from
vendors
> Shipping & Assembly
> Salvage records
> Impound records
> Export data
> International Salvage
and Thefts
273.0 million
US database contains 602.2 million claims
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© 2009 ISO Services, Inc.
ISO ClaimSearch
US: Typical Daily Activity – Claims Reported
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For Internal Use Only
© 2009 ISO Services, Inc.
ISO ClaimSearch
How the system works
Universal Format
Reporting
Company
System
Claims & Policy
Data
• Insurers and other participants submit claims system-to-system or via
the Website to centralized database
• ISO ClaimSearch automatically loads claims into the database
• The system searches to find other claims filed by the same individuals
or businesses, either as claimant or as insured
• ISO ClaimSearch automatically returns Results Reports containing
matching claims and records from the database
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© 2009 ISO Services, Inc.
ISO ClaimSearch
• Our anti-fraud system can
be accessed online, realtime, 24-7.
• Insurers and other
authorized participants can
submit claims system-tosystem or via the Website.
• SIUs and claims personnel
use the system for followup fraud investigations.
• Users customize their
online queries to search on
any given field of
information to support a
specific investigation.
• System provides
instantaneous results for
these queries.
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© 2009 ISO Services, Inc.
ISO ClaimSearch
Privacy & Security
• ISO recognizes the need for strong data security practices
and policies and is committed to rigorously safeguard and
control access to its information to secure the privacy of its
clients, their customers and the public
• Our strict privacy and security policy ensures that:
– Only authorized individuals within appropriate entities can
access and use the data
– Users must access and use the information in a manner
consistent with laws and regulations
– Information is secure from damage and destruction
– The system has procedures to audit the access and use of
database information
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For Internal Use Only
© 2009 ISO Services, Inc.
ISO ClaimSearch
Customized anti-fraud systems developed for international
markets
ISO ClaimSearch Israel
• Claims and underwriting system identification of suspicious information
 Currently auto personal injury claims; waiting for regulatory approval
to expand to other lines
 Claims system available since 2004
 Underwriting will be launched in late 2009
• Online system, nightly process of entire industry claims; instant response
for validations of underwriting variables
• Analytics to identify suspicious activity includes industry information as
well as governmental party data provider information
• SIU Services provided by designated ISO staff residing in Israel; ongoing
training for insurer SIU on active cases
• System resident in country
For Internal Use Only
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© 2009 ISO Services, Inc.
ISO Claims Solutions
To expand the power of ISO ClaimSearch, we offer a
variety of powerful tools
• Expert claims scoring system
• Supplementary information for claims analysis &
investigation
• A system for managing bodily injury claims
• Data mining and visualization software
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© 2009 ISO Services, Inc.
Value to the Insurance Industry
ISO services provide:
– Economies of scale
– Efficiencies of operations
– Consistency
– Cost savings
– Risk assessment and decision analytics—
ability to identify, manage and mitigate risk
ISO services promote a healthy insurance
marketplace
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© 2009 ISO Services, Inc.
Insurance Services Office (ISO)
www.iso.com