Transcript Download Handout 1

The Indication Is That your Final Answer
CAS Ratemaking Seminar
March 11, 2001
Introductory Session 4
Mark Homan
The Hartford
Roger Schultz
Allstate
Overview
Interpreting the Indication
 Marketplace
 Expected Reactions
 Non-rate revenue Alternatives
 Testing the Action
 Market Models – Putting it All Together

Why it’s not “The Final Answer”

Indication is too low
 May
lead to profit problems
 Don’t need to drop rates that much

Indication is too high
 Will
lose customers
 Regulators won’t allow
 Not really needed
Interpreting the Indication

Data Anomalies
 Large
Losses
 Weather Effects
 Changes in Statutes

Changes in Company Practices
 Underwriting
 Claims
 Planned
Changes
Marketplace
Competitive Position
 Recent Competitors Actions
 Projected Future Changes

Competitive Position
Various measures of competitiveness
 Percentage of Competitor rates

 Single
Competitor
 Average of Group of Competitors

Win Rate
 Percentage
of cases when you have best rate, or
within $X of best rate
Competitive Position
Indication of +8.7%
 Competitive Position – 20% below

 Resulting

Position – 13% below
Competitive Position – 10% above
 Resulting
Position – 20% above
Competitor Actions
Recent Changes – not reflected in
competitive position
 Indicative of future changes

Expected Reactions

Policyholder
 Retention
 New
Business
Agents
 Regulators

 Recent Approvals
Non-rate Revenue Approaches
Revenue Indication, not Rate Indication
 Expense Actions
 Underwriting Guidelines
 Marketing Plans

Testing The Plan

Expert Judgment
 Elasticity
of Demand around similar changes
 Intuitive Evaluation

Scenario Modeling
Speaker Contact Information
Mark Homan
AVP & Actuary, Personal Lines Pricing
The Hartford
Hartford Plaza, T-1-55
Hartford, CT 06115
Phone: 860/547-2015
Fax: 860/547-2013
E-mail: [email protected]