Policy Pricing

Issue:  In December 1998 the Customer began to reevaluate its underwriting practices. Their goal was to evaluate the appropriateness of discretionary discounts applied to the risks it was insuring.  As such, the Customer needed reliable data to review discounting patterns measured against performance and experience modification factors. The Customer used Millbrook to evaluate and refine its pricing strategy.

Solution:  Using Millbrook, they performed various analyses that showed the relationship between underwriting directed credits, loss ratio and experience modification performance using multiple levels of aggregation.

Result:  Between December 1998 and December 2000, the Customer's policy count declined 7.3%, while inforce premium increased 21.6%.  In addition, the average premium per policy increased 31.2%.  Based on this analysis the customer concluded that by appropriately pricing its risks relative to their experience history they were able to increase revenues, while decreasing their exposure.  This reduction of total policies also created other efficiencies within the organization (i.e., decreasing the number of new claims).  Additional analyses using our products shows that over this same three-year period they decreased the average amount of credits per policy.  Calendar year loss ratios decreased a total of 30% from December 1998 to December 2000.

Back to Case Study List