Predictive modeling has been around for decades. However, only recently have these techniques and tools been considered for use by Life Insurance companies in the product development, sales, underwriting, and in-force management of mortality risk products.
It is becoming evident that over the next several years, Life Insurance Companies will be moving towards using these new techniques and tools. It makes so much sense to do so as predictive modeling tools and techniques are considerably more powerful than the traditional tools and techniques used by Life Actuaries and the Life Insurance Industry.
Claim Analytics has 15 years of experience providing Predictive Modeling products and services to the Life Insurance marketplace. We have the experience to provide Life Companies with guidance and support as they move towards using Predictive Models for their products.
Our approach is a gradual and staged implementation. This allows a company the necessary time to gain comfort and confidence in using these new tools and techniques and incorporate them into their business processes in the most logical and least disruptive manner.
Phase 1 – Immediate Results and Prepare for the Future
Build predictive model to reproduce underwriting decisions
Extend data collection
Staffing and training
The first step typically is to develop a predictive model which reproduces current underwriting decisions. This not only provides the company an opportunity to gain familiarity with predictive models but provides immediate benefits as a check value for ensuring the consistency of underwriting decisions.
Other early steps typically include identifying and setting up processes to collect data items needed in the future to build predictive models that will directly model mortality rates and underwriting decisions; identifying and planning for future predictive modeling resource needs; and identifying ways to improve the application process (e.g. modifying the questions in the application form and/or modifying the testing requirements)
By the end of the implementation process, a company can expect to be using predictive modeling tools extensively in their Life Insurance business, resulting in improved efficiencies and profitability.
Phase 2 – Evolve and Find Point-Wins
Incorporate new data sources
With a team in place you will be able to deliver incremental improvements. We will be there to support on an as needed basis.
Phase 3 – Develop Rules from First Principles
Develop rules based on actual experience, including new data sources
Ongoing team development
Ongoing monitoring and recalibration
Many companies today are talking about replacing their underwriting processes with automated decisions based on actual experience rather than reproducing their current process. This can be done based on based on the data we will help you set up in the first phase.
Although we describe this as three phases, our initial focus is on the first phase. Once this is successfully implemented you will naturally move on with ongoing improvements. You may, or may not, decide that it is necessary to reproduce from first principles. That will become evident over time.