Speaker Name & Country : Dr.

Winnie Sun, EY/ CAS, China

Dr. Justine Poon, EY/ CAS, Hong Kong, China
Topic:
Getting Ahead in Predictive Analytics
 The Questions to Address
Why do actuaries need to stay abreast of Predictive Analytics?

How do insurers and reinsurers use Predictive Analytics tools to

manage the risks associated with their portfolios?

How and where can todays risk professional learn more about
Predictive Analytics?

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Section 1:
Why do actuaries need to stay abreast of
Predictive Analytics?

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What does it all mean for insurance and
risk management professionals?

Big Data & Analytics

Business
Data Science Intelligence

Predictive
Statistics Actuarial
Analytics

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 Analytics
Value
High -Value

4 4. Prescriptive how can we make it happen?

3. Predictive what will happen?

3

Quick -Wins 2. Diagnostic why did it happen?

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1. Descriptive what happened?
1

Difficulty

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 Predictive Modelling
Predictive Modelling
relationship between predictive variables and the outcome.

Predictors of Motor Outcome

Insurance
Drivers Age
Pure Premium
Drivers Gender
Predictive Frequency
Drivers Experience Modelling Severity
Vehicle Type
Loss Ratio
Vehicle Age

Target new customer segments in the existing market is the top strategic priority for
global insurers
---State Street 2014 Global Insurance Survey

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 Example: Generalized Linear Model (GLM)

A powerful and flexible regression model

~exponential family (binomial, Poisson, gamma, Tweedie )
= (link function can be identity, log, power, square
root )

Available in statistics software SAS, R

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Value of Predictive Modelling

Comprehensive
Abundant external sophisticated big
data data In-Depth
customer
insight

Constant
update
internal Targeted
data customer
strategies,
measures
Varieties in product
selection, customer
service

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 Applying Actuarial Skills to Broader Fields
Actuaries can apply their unique analytic skillset and knowledge in non-traditional actuarial fields. In
turn, the experiences can broaden the types of work an actuary can do and allow them to become
more well-rounded professionals.

Data-driven
decision making

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Section 2:
How do insurers and reinsurers use Predictive
Analytics tools to manage the risks associated
with their portfolios?

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Data-Driven Decision Making
Under-
writing

Pricing

Marketing Sales

Claim Reserving
Manage

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Case I: Life Insurance Underwriting
Traditional Underwriting
Underwriting Score:
Rules:
To indicate risk
Medical professionals
level
experience
Simultaneously
Physical examination
consider multiple
variables in various
forms
Pitfalls
Improve the cost-
Single factor or two-way
effectiveness of
Low underwriting
physical
rejection outcome while
examination
costly

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 Case I: Life Insurance Underwriting

Salary
Predictive model
Logit regression model or GAM

Practical questions
How to define high risks?
Coverage

How to group different levels of a variable?

How to build in interactions?

Coverage
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 Case II: Up/Cross Selling
Client segmentation with predictive modeling

Identify best Find others

Existing customers
customers like them

Predictive
Modeling

Input Factors:
Age, Gender
Media preference
Channel response
Claim history

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 Case II: Up/Cross Selling
Predictive modeling with matched external data for better up
selling
Match Internal Data with Significantly improve
External Big Data Conversion Ratio

Online Bank
Shopping Transaction
Web Selected by Random with Random
Browsing predictive matched data
model

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 Case III: Motor UBI (Pay As You Drive)
2013
Mid 1990s
~38% of cars with
1929 Commercial wireless model year 2013 are
Paul Dorweiler, former 1980s device appeared with telematics device
president of CAS, in US
Electronic device that Late 1990s
identified driver
collects data 2018
behavior, daily car use, Telematics were
appeared
and mileage are introduced. Data ~80% of new cars are
related to claim cost. collected was used for manufactured with
UW and pricing telematics device in
US

*Dimitris Karapiperis and Birny Birnbaum, Aaron Brandenburg, Sandra Castagna, Allen Greenberg, Robin Harbage, Anne Obersteadt. 2015.Usage-Based Insurance and
Vehicle Telematics: Insurance Market and Regulatory Implications. NAIC.

**Paul Dorweiler. 1929. Notes on Exposure and Premium Bases, Proceedings of the CAS XVI, p. 319; reprinted PCAS LVIII, 1972, p. 59.

*** HIS iSuppli. 2013. Telematics to Find its Way into More Autos in 2013. Market Insight, IHS Technology, March 21, 2013.

**** HIS iSuppli. 2011. Embedded Telematics in the Automotive Industry. White Paper, Nov. 22, 2011.

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 Case III: Motor UBI (Pay As You Drive)
Motor claim costs are dependent on driving behavior.
Driving behavior is monitored while the insured drives:
Time of the day
Rigid acceleration Good Driving
Behavior
Lower
Premium
Hard Braking
Mileage, etc.

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 Case III: Motor UBI (Pay As You Drive)
Insureds have incentives to drive safely which eventually
reduce the number of accidents. This will benefit the society as
a whole.
The subscriptions of UBI grow at a rate of about 80% from 5.5.
million at 2013 to 107 million in 2018.
*Dimitris Karapiperis and Birny Birnbaum, Aaron Brandenburg, Sandra Castagna, Allen Greenberg, Robin Harbage,
Anne Obersteadt. 2015.Usage-Based Insurance and Vehicle Telematics: Insurance Market and Regulatory
Implications. NAIC.

** ABI Research. 2013. Global Insurance Telematics Subscriptions to Exceed 100 million by 2018, but Auto
Insurance Faces Dramatic Changes. June 6, 2013.

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 Case IV: Medical (Pay As You Live)
Medical claim costs are dependent on life style:
Weight / Height Heart Rate
Smoking Blood Glucose Level
Sleeping Habit

Health Accumulation of Shopping, Gym,

Health Related Personal Plan to Travel etc.
Review to access points by living
SCORE be more healthy
the health risk healthier Discount

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 Case V: Reserve Analytics
Building Reserve Prediction Framework for individual claims
Development of statistical models to predict claim reserves
Prediction of reserves at various stages of claim life cycle
Integration with Claim Centre to automate reserve calibration
Claims
Management
System

Claim information extraction Reserve feed to CMS

Policy Stage FNOL Reserve Estimation
DOE 12-04-1972 Claim Number X0000100Z
Was the person driving the car? (Y/N) Y Estimated Reserve $210,000
Vehicle Type (Car/Non Car) Car Lower Boundary $192,500
Injury score (0-100) 36 Upper Boundary $218,350
Reserve Engine (RE)
FNOL
Data transformation
and feed into First Medical Output reserve
engine estimate with range
Final Medical
Forensic

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Section 3:
How and where can todays risk professional learn more
about Predictive Analytics?

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 Skillsets Needed for Predictive Analytics

Data hacking

1 Data sourcing knowledge, capabilities in data assembly and

management

Contemporary analytics tools

2 Generalized Linear Models (GLMs), Classification and Regression Tree

Analysis (CART), data visualization, etc.

3 Contextual knowledge
Domain knowledge, which includes full appreciation of insurance risk

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 Predictive Analytics Process
Preparation Establishment Validation Output

Variables
Internal data Descriptive Model
Model Results
Analysis Validation
External Data Interaction
Predictive Deployment
Adjustment
Analysis
Contextual
knowledge
Relationship

Key:
Simple model can be better
Interpret model results and extract business insight
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Insurance and Risk Management Professionals Education in
Predictive Analytics Applications

ACADEMIC
THE INSTITUTES THE CAS INSTITUTE
DISCIPLINES
Business Applications Actuaries / Specialists
PhD Statisticians
of Data Analytics Insurance & Risk
Computer Science
to Insurance Risk Data Science / Analytics
Data Science

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 What is The CAS Institute?
Subsidiary of the Casualty Actuarial Society
Provides credentialing and professional education to
quantitative specialists in selected areas, such as:

Predictive Analytics Catastrophe Capital Modelling /

/ Data Science Modelling ORSA analysis

Quantitative Other analytics and

TheCASInstitute.org Reinsurance quantitative
Analysis specialties

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 Certified Specialist in Predictive Analytics (CSPA)
Credential Requirements
1. Property Casualty Insurance Fundamentals
Extracts from CAS Online Courses 1 & 2; extracts from Intro to Ratemaking / Reserving (CAS Exam 5)
One Online Module: Course iCAS DS1
Exam through The Institutes (multiple choice, short answer)
2. Data Concepts, Tools & Analysis with P&C Applications
Exam through The Institutes (multiple choice, short answer)
3. Predictive Modeling Methods and Techniques
3 hours Computer-Based exam ability to use software
4. Predictive Modeling Application Project
Individual project; not an exam or online module
Assessed by Project Review Panel
5. Online Course on Ethics and Professionalism
No fee no exam
Can be waived with CAS COP

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 Certified Specialist in Predictive Analytics (CSPA)
Procedures and Registration
Credential Requirement Availability
Online Course opens now
1. Property Casualty Insurance Fundamentals
Exam offered starting mid- January 2017

2. Data Concepts, Tools & Analysis with P&C Online Course opens mid-January 2017
Applications Exam offered starting mid-April 2017

3. Predictive Modeling Methods and Study Materials available mid-April 2017

Techniques Exam offered starting mid-July 2017
4. Case Study Project: P&C Predictive Modeling Project assignments available starting mid-July
Application 2017
5. Online Course on Ethics and Professionalism Now available on-demand through The Institutes

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Thank You!

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