Benchmarking is useful in loss reserving and ratemaking assignments from at least two perspectives. First, to the extent a program’s loss development data is not of sufficient size to be fully reliable, benchmarks are needed to supplement the information to make reliable estimates of unpaid claims liabilities. Second, once an analysis is complete, benchmarking your program’s results to others (i.e., competitors, peer companies or industry aggregates) is useful for comparison purposes.

The benchmarks used to supplement your data are only as good as the nature of the underlying data. A benchmark for commercial auto liability, for instance, may not be predictive of an insurance program for tow truck operators as the former is very broad and the latter is a very narrow business class. Likewise, a benchmark loss development pattern based on countrywide data may not be predictive of future loss emergence of a book of business in California. Pinnacle strives to construct benchmarks for any given analysis as close as possible to replicating the nature of the underlying data being reviewed.
 

We have experience working with model output from all the major catastrophe modelers for hurricane, other wind, earthquake, and fire and can make recommendations for:

• Designing rating plans and territory boundaries
• Determining appropriate catastrophe loads, including the net cost of reinsurance calculation for rate filings
• Supporting rate filings in challenging environments such as Florida and California
• Testing reinsurance/risk financing structures
• Exposure management

Pinnacle helps insurers identify rating plan elements that can be more appropriately priced or added for additional risk segmentation. You can benefit from Pinnacle’s class plan analysis, which evaluates rating relativities with multivariate analysis to eliminate distributional bias in insurance pricing, regardless of the size of your company.

Pinnacle is experienced with using external data to supplement your own experience. For class plan analysis, we have used data from:

• Marshall & Swift / Boeckh (MSB)
• Highway Loss Data Institute (HLDI)
• U.S. Census Bureau
• R.L. Polk
• Dunn and Bradstreet
• TransUnion
• Choice Point
• Carfax
• Explore

Pinnacle has a powerful set of competitive analysis products and services that provide in-depth market analysis capabilities. These capabilities enable us to compare premiums and rating plans. Even better, our color-coded maps will give you a clear picture of your competitive position. Our tools can also help answer questions like: "If we are not competitive, is it a concentrated problem or limited to a certain class or territory?" or "In which territories are we both competitive and profitable?"

With a strong knowledge identifying exposures, we recognize that differences exist between businesses. Upon classifying the various exposures, we can establish a proper structure to minimize losses. Other ways we can help you manage exposure include:

• Quantifying expected risk potential for all exposures by frequency, severity, and predictability
• Recommending appropriate risk financing mechanisms for the exposures
• Independently auditing your existing risk management program

Pinnacle has produced many industry studies to demonstrate differences in regulatory, social and economic conditions within and between states, as well as the impacts of potential legislative and regulatory changes. Many of these studies look at costing of legislation and both historical and expected impacts on insurance coverage availability and affordability. Our studies include evaluations of:

• The impact of tort reforms on liability insurance coverages including automobile, general, products, medical and non-medical professional liability
• The impact of Florida hurricane and wind pools
• No-fault thresholds, repeals and other coverage features
• Uninsured and underinsured motorists stacking provisions
• The role and design features of patient compensation and birth injury funds on medical professional liability insurance
• The impact of both competitive and monopolistic state compensation funds for workers compensation
• The likely impact of the implementation, modification or repeal of caps on non-economic damages on medical professional liability insurance
• The medical professional liability insurance market and its impact on the access to healthcare
• How contractors liability and home warranty tort reforms impact contractors and construction markets
   

A predictive analytics marketing analysis can help you more effectively use your limited resources to target potential new business. Based on marketing response and hit ratio analysis, insurers can determine:

• Which potential marketing targets are most likely to respond?
• Of those who respond, which are most likely to purchase a policy?
• How do I optimize my marketing plan to maximize profitable business?
• What are the characteristics of a customer that shops? Who is most likely to switch?
• How likely is it that a certain type of customer will respond to cross selling?

Pinnacle is experienced at comparing and contrasting coverage forms for many commercial and personal lines of insurance. For many specialty products, unique coverage features are essential to avoiding coverage pitfalls, meeting agency and insured expectations and setting your products apart from companies using industry boilerplate forms.

Pricing insurance products today has become much more sophisticated. Insurers are using many new factors to segment insurance risk in innovative ways. We can apply predictive analytics to better segment and price your risks and maintain or gain competitive advantage.

Our pricing services include:

• Identifying and processing insurer data for pricing analyses
• Identifying and introducing external data to supplement pricing plans
• Supporting new pricing plan implementation in many ways - such as internal system specifications and regulatory approvals

We can handle product management in several ways, including:

• Profitability Estimates: to determine expected profitability after identifying and comparing a risk’s loss potential with proposed premium
• Customer Response Modeling: finds which customers buy or renew policies
• Price Optimization: shows the influence of price, competition and customer demand of an insurer’s profitability and growth
• Marketing Solutions: evaluates how successfully marketing initiatives are identifying and attracting targeted and profitable risks
• Agency Management: considers agency performance relative to the book of business

Pinnacle has experience in all stages of program development -- from creating a new, unique program to program conversion. This includes everything from refining existing programs to developing new programs. Pricing, coverage features, and eligibility can all play an essential part in a successful new product. Pinnacle also has experience developing program submission books for taking proposed programs to market seeking fronting carriers.

We prepare commercial and personal lines filings for insurers throughout the country and assist several state insurance departments with rate filing support. This includes a complete and thorough actuarial review of rates, rating rules or other rate-related filings to determine compliance with accepted actuarial principles, state statutes and state regulations.

A rate indication determines the rate change necessary for insurers to meet their target profit levels. The rate indication requires future loss estimates and expenses and must meet actuarial principles and state requirements. Using insurance company and industry benchmarks, Pinnacle can provide rate indications and actuarial memorandums to support your rate filings.

Using external data, Pinnacle creates vehicle classification factors that replace or supplement existing model year and symbol factors. Pinnacle can help insurers develop their own vehicle classification factors so introducing new models is quick and easy.

With Pinnacle’s help, changing systems and programs do not have to cause large disruptions. We can smooth such transitions by:

• Identifying class dislocations
• Developing loss cost multipliers by state, program, and potentially class to help maintain current rate adequacy
• Identifying program segments that may be disparately impacted from the conversion
• Creating transition controls -- such as transition rules and company-specific class codes -- necessary for a smooth conversion

Territories should be regularly updated or reconsidered to ensure risks are competitively priced. Thanks to the emergence of multivariate analysis and clustering and smoothing techniques, we can help you discover state-of-the-art rating territories that will challenge your competitors.

We can help you develop the most appropriate theoretical territorial set, adjust these sets for real-life constraints and review the impact upon your existing portfolio. Pinnacle can also make further adjustments based upon desired maximum rate swing constraints and provide rate filing support.

Pinnacle has developed clustering techniques for territorial analysis, which begin with data at a very refined -- typically ZIP code -- level. Then we smooth and cluster the data in an iterative process to form homogeneous rating territories. We have applied these techniques for many clients, in several states to produce rating territories that comply with any state rating restrictions. This approach can also help you design more objective and predictive territory definitions.

If your data is too sparse to have full credibility, Pinnacle can help obtain additional data to supplement your data with additional experience.

Our Geographic Information Systems analysts create territory boundary maps electronically for use in either PCArcView or MapInfo mapping software. These files allow us to identify areas where mismatch of territory definitions create either competitive advantage or competitive disadvantage.

We have also built a library of rating territory maps for auto and home. These maps have been the backbone of our competitive analysis services and are now available through our mapping services department. The maps are available on paper or in electronic format (Mapinfo, Arc/view). We will export into other formats on request. The files can also be overlaid to show comparisons between companies. If we don't have the company, line or state that you are looking for, custom mapping is available.

Tiering Plans & Underwriting Scorecards use a variety of risk characteristics to develop a scoring system for pricing and underwriting applications. Our real-world experience positions us to handle your toughest underwriting challenges, including persistent underwriting losses, risk selection and tiering. We have the experience and understanding to address your classification problems and help you tailor your programs to complement your marketing efforts.