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more than the standard change offered at renewal) that will provide insights into customer elasticity. The next evolutionary stage for pricing sophistication is for companies to learn to integrate their cost estimates with knowledge of customer behavior. This can involve scenario testing rate changes and measuring the effect on key performance indicators, taking the effect of customer behavior into account. Scenario testing involves price optimization techniques that systematically integrate cost and demand to indicate an optimal set of prices that meets or exceeds corporate objectives for profitable growth, while staying within company constraints. Beyond Pricing Predictive model use doesn’t have to end with ratemaking, Armstrong said. Models can help in other areas. And actuaries can explain how the models work and what potential they contain. “I want you to think beyond pricing” and help solve business problems, he said. For example, predictive models could help underwriters work more efficiently. For instance in auto insurance, young drivers receiving good student discounts have to regularly turn in copies of their grades. Predictive modeling could show that some types of students don’t need to perpetually update, while others would. Armstrong said models also could help underwriters determine which workers’ compensation risks should be tapped for a premium audit. Predictive modeling also could help marketing by researching what mix of social media grows the customer base or what brand attributes drive new business. The concept isn’t new to marketers, but the actuarial skill set can enhance understanding of the work. And claims departments “swim” in a vast, vast pool of data that only awaits discovery — claims diaries, records on attorney involvement, and information on service providers and adjusters, Armstrong said. The list of areas where actuaries could help insurers quantify and understand their operations seems limitless, he added. “Wherever there is data, there is opportunity.” www.insurancejournal.com

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Agency Management Systems / Insurance Exchanges; Commercial Auto; Digital Product Guide  
Agency Management Systems / Insurance Exchanges; Commercial Auto; Digital Product Guide  

Agency Management Systems / Insurance Exchanges; Commercial Auto; Digital Product Guide