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Nikole McMyler

on 7 March 2017

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Transcript of Risk...Insurance...

Risk, Insurance, and Cupcakes
Risk Management Techniques
(Probability of Accident Happening)
(Expected Loss)
Action or Inaction
Foreseeable and Unforeseeable
Integration with Policy Admin is KEY
Types of Risk
Speculative Risk
Pure Risk
Chance of Gain
Chance of No Loss
Chance of Loss
Chance of No Loss
Chance of Loss
Drivers of Loss
Tenets of Insurance
Law of Large Numbers
Losses are Unforeseen and Unexpected
Insurable Interest
No intentional accidents
Don't get insurance if you are certain a loss will occur
"to make whole"
Restored to state you were in prior to the loss
Not better...not worse
We only insure "Pure Risks"
The difference between:
Loss of Your Home
Loss of Neighbor's Home
Otherwise it's just gambling
...economic stake in the continued existence or safety of the person or property
Asymmetric Information
I'm sick...
I'm healthy...
...so I want insurance
...so I don't
I know something you don't know!
Adverse Selection
Moral Hazard
Use information BEFORE transaction
Use information AFTER transaction
Sick person buying life insurance
Person with fire insurance more likely to commit arson
Product Management
Implement "products"
Actuaries determine the rates
Consult with Insurance Commissioner and file rates, in each state
File Rates, File Rules, File Forms
Consult with Attorneys and different insurance bureaus
Predict likelihood of future events
Put price tag ("rate") on future losses
Protect Book of Business
Appropriate premium is charged
If accepting a risk:
Classify risk
Terms of Insurance Contract
Work almost always involves updates inside the PAS
Internal or through vendor
Wall Street Journal “Best Job” in 2013
There are no bad risks...just bad pricing
Tech and Underwriters
Should focus on risk...not systems...
Utilize rules and automated workflows
STP for smaller accounts
90% Personal Lines
Suppose you don't pay your bill...
Coverage will lapse

Suppose you pay your bill later...
Coverage MAY be reinstated

Suppose you overpay?
Or underpay?
Billing System must reconcile all of this based on policies and billing plans
Loss Control
Risk Management Technique
Reduce “frequency” and “severity”
Proactive and early intervention
Makes recommendations to customers
Forwards to Underwriter
Insureds don’t want losses…
Direct link to Underwriter
Highly mobile
Claims Adjusters
Liability of Insurance Company
Coverage exist?
How much? (Indemnify)
High Client Interaction
Systems should improve customer experience
Oh Yeah...
This is where 60% of the insurance dollar goes...
Did I forget to mention...
Work with many insurers

Aon, Marsh, Willis, Lockton, M3, Hays
Work with many insurers

John Doe Insurance Agent...
Work with ONE insurer

American Family Insurance Agent...State Farm Insurance Agent
Performance Measures
Loss Ratio
(Claims Paid + Loss Adjusted Expenses) / (Earned Premium)
P&C: Typical is 60%, with a 40% margin to cover other expenses and profit

Expense Ratio
(Underwriting Expense + Agent Commission) / (Written Premium)

Combined Ratio
(Loss Ratio) + (Expense Ratio)
Below 100 = Underwriting Profit | Above 100 = Underwriting Loss
Industry ran at 103 in 2012

Net Investment Income Ratio
(Net Investment Income) / (Earned Premium)
1. Operations
2. Investments
Underwriting and Claims
Claim Reserves
Unearned Premium
Social Issues
I hate insurance!
Why did you deny my claim???
Why did my premium go up?
Why did you cancel me???!!!
Oh my...
we'll come back to this...
Issues for Insurance
Time to Market for New Products
Outdated Technology Systems
Customer Loyalty
Better Risk Pricing
Average: 12-18 months
Legal liability
Mistakes cause fines
Costly to maintain
Between demographics
Especially in claims
Customer service rates poorly
Solution: Analytics
Business Intelligence
CRM and 360 View
Business Intelligence
Predictive Analytics
Software Selection
Extend Life of Systems
Change Management
Mulling through and automating is...difficult
Thanks for Joining
Old car without comprehensive or collision coverage
Sprinklers in home
PIN on debit cards
Don't drive in blizzard
Independent Agents
Captive Agents
Full transcript