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2002 CAS RATEMAKING SEMINAR PRODUCT DEVELOPMENT (COM - 20)

2002 CAS RATEMAKING SEMINAR PRODUCT DEVELOPMENT (COM - 20). BETH FITZGERALD, FCAS, MAAA. Product Development. What is the Process? Examples: Employment-Related Practices Liability Directors & Officers Liability Viewpoint of Actuary. Outline of Process. Product Need

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2002 CAS RATEMAKING SEMINAR PRODUCT DEVELOPMENT (COM - 20)

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  1. 2002 CAS RATEMAKING SEMINARPRODUCT DEVELOPMENT(COM - 20) BETH FITZGERALD, FCAS, MAAA

  2. Product Development • What is the Process? • Examples: • Employment-Related Practices Liability • Directors & Officers Liability • Viewpoint of Actuary

  3. Outline of Process • Product Need • Business Case Proposal • Policy Form Development • Rule/Loss Cost Development • Filing Preparation • Statistical Impact • Marketing/Sales Plans • Future

  4. Product Need • Customer Survey • Monitoring of Market

  5. Business Case Proposal • Product Description • Business Risks • Financial Analysis

  6. Business Case Proposal • Revenue Projections • estimate number of customers • how product is to be priced • Expense Projections • initial R&D of product • maintenance of product • IS costs • include expenses from all departments (Finance, Marketing, Sales, Legal, Government)

  7. Policy Form Development • Research Coverages • Discuss Potential Coverages for Inclusion in Product • Draft Policy Forms & Endorsements • Discuss with Insurer Panels, Agents, Brokers, Risk Managers • Legal Approval

  8. Rule Development - Other Than Premium Determination • Definitions • Eligibility • Rounding Premium • Minimum Premium • Additional/Return Premium • Cancellations • Description of Basic and Optional Coverages

  9. Rule Development - Premium Determination • Decide on Rating Structure for Basic Coverage Premium • practicality vs. accuracy • exposure base • classification plan • vary rates by state, territory? • Decide on Rating Structure for Optional Coverages • ILF’s, deductible/co-payment relativities • Manual Rules Reviewed by Insurer Panels

  10. Pricing of Loss Costs/Relativities • Understand Coverages - inclusions, exclusions, endorsements • Data Needs • Data Availability • Decide on Methodology • Discuss Methodology with Insurer Panels

  11. Filing Preparation • Loss Cost Filing • Conform to State Regulations/Statutes • Respond to Regulatory Concerns

  12. Statistical Impact • Determine Future Ratemaking Statistical Needs • Balance Data Needs with Practicality/Cost of Data Collection • May Collect More Detail Than Used in Rating (e.g. territory, individual class) • Discuss with IS & Insurer Panels

  13. Marketing/Sales Plan • Decide on Target Customers • Prepare Announcement Material for Customers • Coordinate with Internal Staff • Sales, Marketing, Finance • Follow-up/Feedback

  14. Future Ratemaking • Develop/Modify Report Systems • Monitor Statistical Data • Determine Ratemaking Methodology for Updating Pricing • short - term • long - term

  15. Future • Coverage Enhancements • Industry Data Compilations

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