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The Indication - Is That your Final Answer

The Indication - Is That your Final Answer. CAS Ratemaking Seminar March 7, 2002. Introductory Session 4. Mark Homan The Hartford Roger Schultz Allstate. Overview. Interpreting the Indication Marketplace Expected Reactions Non-rate revenue Alternatives Testing the Action

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The Indication - Is That your Final Answer

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  1. The Indication -Is That your Final Answer CAS Ratemaking Seminar March 7, 2002

  2. Introductory Session 4 Mark Homan The Hartford Roger Schultz Allstate

  3. Overview • Interpreting the Indication • Marketplace • Expected Reactions • Non-rate revenue Alternatives • Testing the Action • Market Models – Putting it All Together

  4. 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

  5. Interpreting the Indication • Data Anomalies • Large Losses • Weather Effects • Changes in Statutes • Changes in Company Practices • Underwriting • Claims • Planned Changes

  6. Marketplace • Competitive Position • Recent Competitors Actions • Projected Future Changes

  7. 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

  8. Competitive Position • Indication of +8.7% • Competitive Position – 20% below • Resulting Position – 13% below • Competitive Position – 10% above • Resulting Position – 20% above

  9. Competitor Actions • Recent Changes – • Not reflected in competitive position • Reflected in competitive position • Indicative of future changes

  10. Expected Reactions • Policyholder • Retention • New Business • Agents • Regulators • Recent Approvals

  11. Non-rate Revenue Approaches • Revenue Indication, not Rate Indication • Expense Actions • Underwriting Guidelines • Marketing Plans

  12. Testing The Plan • Expert Judgment • Intuitive Evaluation • Elasticity of Demand around similar changes • Scenario Modeling

  13. Scenario Modeling

  14. Scenario Modeling

  15. Scenario Modeling

  16. Scenario Modeling

  17. Scenario Modeling

  18. Scenario Modeling

  19. 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: mhoman@thehartford.com

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