BAS 2020 Block Dental Case Competitionactuary/caseCompetition/2020...BAS 2020 Block Dental Case...
Transcript of BAS 2020 Block Dental Case Competitionactuary/caseCompetition/2020...BAS 2020 Block Dental Case...
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BAS 2020 Block Dental Case Competition
Team 28Wilson Yu, Yunqi Shi, Boyang Wan, Hengyuan Qi
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Probability Model
Profit &
Revenue Opitimization Strategies
Final Strategy
Implications
C O N T E N T
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2
3
4
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Data
Analysis
Probability
Model3
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Data
Analysis
Logistic Regression
4
Probabilistic model
Binary dependent variable
Linear method
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Data
Analysis
Considerations For Factors
5
Strong Association
High Accuracy
Independent Factors
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Data
Analysis
Considerations For Factors
7
Strong Association
High Accuracy
Independent Factors
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Data
Analysis
Probability Model
8
Pro
ba
bility o
f Win
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Data
Analysis
Profit &
Revenue Optimization
Strategies
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Data
Analysis
10
Reasoning Assumption
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Data
Analysis
11
Formula
Revenue= Premium × Probability
Profit = (Premium-Claims) × Probability
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Data
Analysis
● Expected Loss Ratio, Claim & Premium Based on Two Strategies
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Revenue Max
Year 1 Year 2 Year 3
Expected
Loss Ratio86% 84% 81%
Expected
Premium$102m $98m $95m
Expected
Claim$88m $83m $78m
Profit Max
Year 1 Year 2 Year 3
Expected
Loss Ratio71% 60% 53%
Expected
Premium$87m $74m $64m
Expected
Claim$62m $45m $34m
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Data
Analysis
Final
Strategy13
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Data
Analysis
14
Maximize
Revenue
Set Loss
Ratio =
70%
Weights
0%
10%
…...
? %
…...
90%
100%
100%
90%
……
1 - ?%
......
10%
0%
Blend of 2 Strategies
39 % 61 %
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Data
Analysis
Average of Rate Increase
LR Bands Year 1 Year 2 Year 3
(0,25] -2.3 -2.3 -2.2
(25,50] 0.4 0.5 0.7
(50,70] 3.3 3.5 3.6
Benchmark : LR = 70%
(70,100] 9.2 9.0 8.8
(100,150] 17.2 16.1 15.3 15
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Data
Analysis
16
1694
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Data
Analysis
Average of Rate Increase
LR Bands Year 1 Year 2 Year 3
(0,25] -2.3 -2.3 -2.2
(25,50] 0.4 0.5 0.7
(50,70] 3.3 3.5 3.6
Benchmark : LR = 70%
(70,100] 9.2 9.0 8.8
(100,150] 17.2 16.1 15.3 17
4
9
16
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Data
Analysis
18
Implications to Management
Large Rate Increase
Fewer Clients
Low Market Share
Less Potential
Large Rate Increase
Rejecting Customers
Moral Concern
Reputation Decline
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Data
Analysis
19
Implications to Management
Large Rate Increase
Fewer Clients
Low Market Share
Less Potential
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Data
Analysis
20
Implications to Management
Large Rate Increase
Rejecting Customers
Moral Concern
Reputation Decline
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Data
AnalysisImplications
21
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Trade-off?
Los Ratio Revenue
Loss ratio
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Data
Analysis
Model Improvements
23
Win Rate
Loss Ratio
Current Rate
Increase
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Data
Analysis
Model Improvements
25
Win Rate
Loss Ratio
Current Rate
IncreaseChannel
Previous Rate
Increases
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Data
Analysis
Strategy Improvement
26
Current
3 Weights
Fast
Proposed
15,000+ Rate
Increase
Flexible
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Other way to reduce loss
ratio?
Underwriting
Guideline
New
Product
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Thank you!
Q & A28