CAS.PredictiveModels

Question 1

What are the potential benefits of using predictive analytics in insurance?

Benefits are (REL)-ly good

Answer 1

• Reveals insights into insurance costs
• Encourages better risk management
• Lowers many consumer costs

Question 2

What challenges do state insurance regulators face with predictive models?

Answer 2

many lack the necessary tools to effectively review rapidly evolving predictive models

Question 3

What are the 2 main responsibilities given to the Casualty Actuarial and Statistical (C) Task Force?

Answer 3

• draft and propose changes to the Product Filing Review Handbook
• provide state guidance for rate filings based on predictive models

Question 4

What is the purpose of the guidance provided in the white paper?

White uniform in school

Answer 4

enhance uniformity in regulatory processes while considering state-specific insurance needs

Question 5

What is the purpose of regulatory best practices for predictive models?

(SImP)

Answer 5

• Support parameter valuation.
• Improve model understanding
• Provide a baseline for state regulators

Question 6

Do regulatory best practices create standards for filings with predictive models?

Answer 6

No
(But they help identify model elements and improve rating plans for consumers.)

Question 7

How do regulatory best practices help state insurance regulators and the industry?

Answer 7

• identify key model elements
• facilitate resource sharing
• improve review quality
• aid in training

Question 8

How do regulatory best practices benefit state insurance marketplaces?

Answer 8

regulatory best practices enhance market speed and competitiveness by improving review processes

Question 9

Identify characteristics a predictive model should satisfy and that regulators should verify (3)

Answer 9

Model is…
* cost-based
* compliant with state law
* improves company’s rating plan

Question 10

How do regulatory best practices assist new insurance regulators?

Answer 10

regulatory best practices provide training and help identify needed resources for model reviews

Question 11

Identify regulatory review items that should be included in regulatory reviews of predictive models

Answer 11

• check rating factors
• check data and model
• check interaction of model with rating plan
• check whether model has desired characteristics regarding insurance marketplace

Question 12

A regulatory review of predictive models should check these rating factor characteristics (3)

Answer 12

• produce fair rates
• not cause excessive premium disruptions
• comply with state practices

Question 13

A regulatory review of predictive models should check these data & model characteristics (4)

Answer 13

• how the model was built
• accuracy of input data
• adjustments to raw data
• update frequency of risk characteristics

Question 14

A regulatory review of predictive models should check these interactions of the model with the rating plan (3)

Answer 14

• must understand input characteristics of model
• must understand integration of model with rating plan
• must understand interaction of model with non-modeled variables

Question 15

A regulatory review of predictive models should check these desired effects on the insurance marketplace (3)

Answer 15

• enable competition and innovation
• protect model confidentiality
• allow timely reviews for speed to market