Title of the Session: Insurance Industry Basics and Trends (Property and Causality

Insurance)

Date: Thursday, April 23, 2015 11:00 AM-12:00 PM

Speaker: Anthony Pavia - Account Executive Catlin

Topics and main message/s communicated:

The speaker began by introducing the Property and Causality insurance, and explaining its 2
types,
Commercial Insurance- This type basically caters to the business, B2B insuring
businesses for disasters, natural calamities etc. It is still unregulated in US.
Company Example: Catlin
Personal Insurance- This is insurance of home, automobiles etc.
Company Example: Progressive
Tort: If a person causes damage or loss to someone else, the person will be legally liable
Then he explained about 2 approaches how the carriers meet the customers,

Indirect Approach (via Agent or Brokers)

Carrier via an agent approaches customer for personal insurance, here agent will have
some power regarding policy decisions
Carrier is approached by a broker for commercial insurance of his client, here broker
wont have any power to influence the carrier
Direct Approach
No 3rd party Broker or agent involved
The Carrier Company itself has internal agent department which will take care of the
customers

Then he explained different functions in Insurance and what type of service does Capgemini
offer to these insurance companies,
The 3 main Functions in Insurance

Policies
Claims
Billing

Capgemini offers two types of services to the companies,

Build
Examples -Transformation, Building the claim systems, replacement of legacy systems
Drawback: We will have to search for new clients after finishing one. Not sustainable
Run
Example Maintaining a built systems, updating processes
Sustainable business, as we will receive regular income

Some Capgemini Clients and Services they are providing them

Commercial Insurance
CAN (Policy, Claim, Run)
Catlin (Policy, Claim, Build)

Personal Insurance
Farmers (Claim)
Progressive (Policy)

Then he explained Premium per policy price determination

The two aspects in Insurance Predictive Analytics is

Frequency
Severity

Frequency x Severity= Pure Premium

Now for Calculating Pure Premium for each policy
Combined ratio (95%) and remaining 5% profit.
Expense ratio after taking all expenses, assume it to be 30%
Then the budgeted loss ratio comes out to be
Combined ratio - expense ratio = 95%-30% = 65%
Finally, Pure Premium per Policy = Pure Premium / 0.65

In these calculations, determining the Frequency is the toughest part.

For this frequency estimation some companies do Predictive analytics by taking Age, Gender
and other attributes, but some use credit scores (which uses missed or delayed credit card
payments).
He explained credit score in detail along with importance of validating,

Charging too much

Companie
s using
Credit

High

Taking business away

Loss Frequency
Companies not using Credit Score

Low
Low

Credit Score

High

Companies using credit score will be more efficient in calculating frequency, in turn they can
charge optimum premium rates.
He explained some other topics like Progressive device- UBI data (Usage Based Insurance),
Google entering Insurance business as an aggregator.

Summary of the questions and answers

1. How is severity measured in terms of life insurance?
Here Property and casualty insurance is completely different than Life insurance, So we
wont have settlement which is calculated as below,
Death: Earning Capability x Life expectancy = Settlement
Disability: Loses Capability x Life expectancy = Settlement
2. How situations are dealt with where there is very less data available like space shuttle
launch?
Less data itself is used, the frequency might not be accurate.
In case of space shuttle insurance the insurance company wont bear all the risks, it
takes care of the primary part where frequency of risks is high, and sells excess risks to
other parties who are willing to buy the risk
3. Can social media like FB and Twitter be used to measure loss frequency?
It is good idea but not yet popular, and there are reliability issues. So credit score still
outweighs it.