Policy Management Lifecycle Methodology Consulting
PALLC’s methodology starts with two vitally important proprietary analytical and consulting services. We call them Sample Set Review (SSR) (also known as a policy book analysis, PBA) and Policy Book Clean-up (PBC). These services are “critical” to any profitability improvement success plan a carrier wishes to achieve involving their personal and commercial auto insurance business.
What is a SSR?
A SSA Sample Set Review analysis) is a comprehensive study into the content and quality of the information contained within a carrier’s policy administration. The SSR consumes NO external data. It solely examines the content as provided by the carrier for fit and suitability at the detailed element level and generates an understanding of the composition and current condition of the auto policies submitted for analysis. The detailed output reports from the SSR illustrate field level integrity, quality of data, missing premium and report ordering optimization opportunities. When provided with claims the SSR may derive important correlations and insight between the filing of the claim and the integrity of the information provided at time of bind.
Why is it critical for a carrier to understand the data quality of their PIF Book?
With the increase in competition and the decrease in profitability, it is imperative that the carriers’ understand the composition of their policy book. In response to the consumer’s demand to secure insurance in a single contact, the carriers’ have allowed a significant amount of “dirty[1]” data into their book in an effort to capture the consumer’s business. The carriers’ and their agents intend to follow up on these missing and dummied fields, but there are no formal tools and utilities for them to do so. It is our estimate based on experiential data that as much as thirty percent (30%) of policies within a carrier’s policies in force have material omissions or exceptions that result in significant amounts of missing / unrealized premium. We also estimate based on experiential data that on average a carrier can save as much at 30% or their total spend on the ordering of credit and underwriting reports.
What value does a SSR offer a carrier?
A SSR offers the carrier significant value by providing an ability to identify these missing and erroneous fields and quantify their impact on premium and potential report ordering savings at the policy level. Once identified the carrier may prioritize by threshold which policies to address.
The SSR provides clear direction for helping you lower your combined ratio, lower your loss ratio, increase your UW margin, lower your UW spend and define your profitable / unprofitable customers for future underwriting practices. Focusing on the most egregious three percent (3%) has shown to lower your combined ratio by 2% to 3%.
What can a SSR Predict?
The PBA is not a predictive model. It is a prescriptive utility that identifies the policies and detailed elements that a carrier needs to “fix”.
What areas of the policy lifecycle can a SSR identify potential problems?
The SSR is recommended to be executed a single time on all Policies in Force. It is then recommended that a SSR continue to be performed on all new policies added at point of sale during the 30 day underwriting “free look” period. Even if a carrier is already using a real time POS fraud system a carrier may still send the policies written, in a batch mode after the fact, for SSR evaluation at a very minimum cost.
What level or reports are developed from the SSR and what does each report provide to the carrier?
As noted below, there are several detailed reports that are created as a part of a SSR. The first level of reporting is the SSR Summary report illustrating a summary of the exceptions noted and the financial impact that may attained by the carrier.
Workbook of Reports
The SSR may generate up to 10 comprehensive reports (tabs) that clearly illustrate the health of a carriers PIF book by identifying policy level exceptions that are correlated to missing premium, opportunities to optimize ordering underwriting reports, and potential reductions in claim expense.
Clean Up & Update the Exceptions
Upon completion of the “Sample Set Review” PALLC may then perform the second step of the Policy Management Lifecycle Method, “Policy Book Cleanup” (PBC). On average approximately 30% of a carriers policy book will require some level of PBC. The PBC service secures third party data to identify and suggest corrections, to be confirmed with the policyholder, for the exceptions found in the policy requiring updating. The value of PBC allows the carrier to improve the correlation of collected premium as it pertains to the actual risk being underwritten.
A major cause of these exceptions occur because carriers haste to underwrite new policies on a single call. As such carriers have allowed a significant number of exceptions and omissions in the policy with intentions to “fix” them at a later date. Unfortunately most of the time these omissions are never updated causing an under collections of adequate premium to cover future claims losses. An additional problematic symptom is the delayed conversion to more modern policy management systems that are frequently delayed due to policy information issues with the carrier costing thousands of dollars in additional implementation cost and wasted time.
To discuss how our SSR service will definitely illustrate the magnitude of impact to your profitability contact us today!
[1] Dirty Data is defined as blank, dummied and / or incomplete fields.