2002 CAS RATEMAKING SEMINAR PRODUCT DEVELOPMENT (COM - 20)

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2002 CAS RATEMAKING SEMINARPRODUCT
DEVELOPMENT(COM - 20)

• BETH FITZGERALD, FCAS, MAAA

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Product Development

• What is the Process?
• Examples
• Employment-Related Practices Liability
• Directors Officers Liability
• Viewpoint of Actuary

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Outline of Process

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

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Product Need

• Customer Survey
• Monitoring of Market

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Business Case Proposal

• Product Description
• Business Risks
• Financial Analysis

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Business Case Proposal

• Revenue Projections
• estimate number of customers
• how product is to be priced
• Expense Projections
• initial RD of product
• maintenance of product
• IS costs
• include expenses from all departments (Finance,
  Marketing, Sales, Legal, Government)

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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

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Rule Development - Other Than Premium
Determination

• Definitions
• Eligibility
• Rounding Premium
• Minimum Premium
• Additional/Return Premium
• Cancellations
• Description of Basic and Optional Coverages

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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
• ILFs, deductible/co-payment relativities
• Manual Rules Reviewed by Insurer Panels

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Pricing of Loss Costs/Relativities

• Understand Coverages - inclusions, exclusions,
  endorsements
• Data Needs
• Data Availability
• Decide on Methodology
• Discuss Methodology with Insurer Panels

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Filing Preparation

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

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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

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Marketing/Sales Plan

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

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Future Ratemaking

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

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Future

• Coverage Enhancements
• Industry Data Compilations