Improving loss ratios and profitability

Triad Analytic Solutions helps insurers benefit from advanced analytics

Property and casualty insurance is an extremely competitive business. For small carriers, survival requires the ability to accurately segment customers by their loss potential and then use that information to price policies competitively.

No one knows this better than Chris Hardin and Brian Scott, both managing partners at Triad Analytic Solutions. Hardin and Scott have parlayed their years of experience into helping small and midsize carriers with limited or no dedicated statistical expertise or data management capabilities to benefit from data and analytics.

By engaging Triad, clients gain access to pricing and product expertise typically found in the analytics departments of large carriers. Triad is able to provide this service with the data integration and analytics capabilities of SAS^® Business Analytics.

Getting to the data

Triad’s services often begin with integrating multiple databases which typically house critical premium and loss data. Once done, the consolidated data marts and automated processes–which ensure the data is constantly refreshed and accurate – are given to clients along with the training that allows them perform the work themselves.

“In one engagement, the client was in a multiyear, seven-figure project with an IT vendor to deliver critical data access,” recounts Hardin. “In a matter of months, we used SAS to build and query an interim database that yielded similar actionable, analytic pricing information. We also trained the employees to maintain and use the database we created.”

Hardin adds: “It's a very satisfying feeling to build the tools that empower a company's employees to help themselves going forward.”

Hiring full-time actuaries and statisticians is expensive for small and midsize carriers, and finding employees with detailed knowledge about the spectrum of distribution channels and customer segments can be difficult.

“There's no substitute for experience,” says Scott. “Our value is that we go into these companies to assist them and train their staff to perform the work after we're gone.”

The competitive advantage

Once the data is ready, Triad's customers can begin applying advanced analytics to drive quantifiable competitive advantages.

“Our clients need to stabilize their overall rating plans,” says Hardin. “From there, they can take analytics as far as they want to. They can move toward understanding price elasticity and retention and more advanced topics. It's a process that builds on itself … the analysis used to solve basic questions often creates the foundation to resolve more complex issues as well.

“There are many small to midsize carriers still pricing policies based on univariate analysis. They look at results one variable at a time and make decisions on how to treat the information. The real benefit in pricing comes from multivariate analysis, which helps you understand the impact of every interaction between pricing variables.

“We've dealt with just about every analytics vendor in the insurance industry, so we have a pretty good idea what’s out there. Typically, the proprietary carrier models we build using SAS offer more lift than generic ones sold by certain vendors. And by maintaining their own models, carriers can save money versus purchasing one, which can double the cost. Some of the lifetime value retention and premium modeling we've implemented has seen monoline auto renewal rate improvements of several points – a result that could easily yield a seven-figure improvement to a carrier's top line.”

Advanced segmenting gives insurers a leg up

“Auto insurance is a very competitive business,” says Hardin. “The companies that can perform advanced high- and low-risk segmentation have a leg up on their competition by more accurately surcharging and discounting their business commensurate with risk. And if the company isn’t using certain rating variables such as credit and insurance scores they’ll miss out on the additional benefits that segmentation can provide such as improved retention and lower acquisition and servicing costs.”

Scott adds: “In terms of loss ratios and profitability, we can show our clients how they can improve their performance with better segmentation and pricing. With SAS, we can not only segment risk and build rating plans more accurately, but also show and quantify for our clients, using historical data, how they could have been more profitable.”

Why SAS?

“SAS is a flexible tool,” Scott concludes. “It handles lots of different data formats and allows us to go from data integration to statistical techniques without changing software. There are other tools out there, but they can't function with our large data sets, nor can they transition so easily to the statistical work.”