Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation's express consent. © 2011 Fair Isaac Corporation Canadian Insurance Outlook Analytic-driven Solutions for Insurance Breakout Session: Underwriting, Pricing, and Product Management January 14, 2011

© 2011 Fair Isaac Corporation. Confidential. 2 2 Agenda »Product Management »Challenges and Vision »Pricing and Underwriting Decisions »Rules »Predictive Analytics »Optimization

© 2011 Fair Isaac Corporation. Confidential. 3 3 Product Management

© 2011 Fair Isaac Corporation. Confidential. 4 Three Key Insurer Challenges Real-life Questions Manage the Risk Portfolio How should we manage our distribution system in order to meet strategic objectives? How should we underwrite and price in various geographies in order to guarantee a strategic and risk-managed distribution of policies? How should we identify the appropriate offers to make to individual customers to meet both growth and risk objectives? Improve Customer Profitability How can we identify how individual customers will respond to new rates in combination with competitive pricing? How can we offer individual customers the “right” package of policies, products and services to increase retention and lifetime value? Respond To Competition How can we resist “following” the competition and focus on profitable customers who are tempted? How can we communicate to the organization the actions required to offset a competitive lower price?

© 2011 Fair Isaac Corporation. Confidential. 5 Vision of Product Management Infrastructure »Cohesive environment for the configuration, modification and management of products »Centralized Product Definitions »Configurable »“Business” terminology »Components for Rules Reuse »Centralized policy data structure »Configurable services »Underwriting »Rating »Policyholder recommendations »Modeling Business Impact »“What if” Simulations »Product centered deployment

© 2011 Fair Isaac Corporation. Confidential. 6 Address the Challenges of Product Management Rules and Analytics Modularity Product Rules Repository and Rule Flow Manager Optimized Customer Response Product/Component Hierarchy Governance Disassembling products and benefits into a combination of components (for maximizing reuse) Centralized rules repository for storing and managing all information needed by the process participants and analytics (product managers, designers, underwriters, etc.) A common definition of the product design and related processes that span multiple functional areas Institutionalize Product Management Legacy Applications Service calls to back-end systems ReuseAnalyticsCollaboration Rule Repository Process & Product Lifecycle Management

© 2011 Fair Isaac Corporation. Confidential. 7 Product Management Environment Rules, Analytics and Optimization Typical scenario

© 2011 Fair Isaac Corporation. Confidential. 8 8 Pricing and Underwriting Decisions

© 2011 Fair Isaac Corporation. Confidential. 9 Product Management Vision Leveraging Throughout the Acquisition Process MarketingEligibilityUnderwritingPricing/Tier Point of Sale/New Business Process

© 2011 Fair Isaac Corporation. Confidential. 10 Product Management Vision Driving Messaging Effectively X X X X X X X X X X X X X X X X X X X X X X X XX X XX X X X X X X X X X X X X X X X X X X XX X X X X X X X X X X X X X X X X X X X X X Data-Driven Segments with Unique Attitudinal Profiles Mapping attitudes to demographic segments Optimizing messaging for current and future prospects More Relevant Messaging & Experiences MarketingEligibilityUnderwritingPricing/Tier Profiling & Segmentation Optimization Predictive Models Point of Sale/New Business Process

© 2011 Fair Isaac Corporation. Confidential. 11 Case Study Results Over Program Goal 36.7% 17.1% Over Insurers Goal Actual program enrollment

© 2011 Fair Isaac Corporation. Confidential. 12 Product Management Vision Proactive Recommendations Configuration 1 With cross-sell Configuration 2 With higher limits Configuration 3 Preferred Status Marketing Point of Sale/New Business Process EligibilityUnderwritingPricing/Tier Predictive Models Blaze Advisor HIGH Predictive Models or “Scores” Multi-Dimensional Trade-Off Assessment

© 2011 Fair Isaac Corporation. Confidential. 13 Variety of Data Sources »Powerful characteristics drawn from breadth of data »Pooled databases »Individual insurance company databases »Consumers »Small business »Credit bureau data » First Credit Based Insurance Scores models were developed and introduced by FICO in 1993 » CBIS scores currently used by ~95% of all auto/home insurers in the US and ~60% in Canada »Motor vehicle data, insurance claims data, property inspection data »US and international »Wide variety of external data sources »Transactional data »Unstructured data (text data)

© 2011 Fair Isaac Corporation. Confidential. 14 Product Management Vision Automated, Consistent Underwriting Review DeclineReferral Automated Approval MarketingEligibilityUnderwritingPricing/Tier Predictive Models or “Scores” Multi-Dimensional Trade-Off Assessment Predictive Models Blaze Advisor HIGH Point of Sale/New Business Process

© 2011 Fair Isaac Corporation. Confidential. 15 Model Builder for Predictive Analytics Identify the Most Predictive Factors

© 2011 Fair Isaac Corporation. Confidential. 16 Model Builder for Predictive Analytics Score Engineering »Imposing constraints on the score to achieve various objectives »Objectives »Palatability »Legal requirements »Robustness over changing times »Adjustments for known sample biases »Engineering techniques »Choose the “right” objective function—possibly more than one »Individual weight restrictions »Characteristic restrictions »Scaling across multiple models »Ongoing FI innovations

© 2011 Fair Isaac Corporation. Confidential. 17 Case Study Results Score RangeLoss RatioActionPortfolio ChangeProfit Change Best 20%40.5%Large discount37.6%+266,000 Second 20%48.2%Moderate discount-8.4%+106,000 Third 20%53.7%Standard rates-8.5%+1,489,000 Fourth 20%58.2%Moderate surcharge-9.2%+3,493,000 Worst 20%64.9%Large surcharge-6.9%+6,237,000 TOTAL54.2%0.9%+11,591,000

© 2011 Fair Isaac Corporation. Confidential. 18 Product Management Vision Optimized Pricing to Meet Conflicting Objectives MarketingEligibilityUnderwritingPricing/Tier Predictive Models or “Scores” Decision Optimization Predictive Models Blaze Advisor HIGH Point of Sale/New Business Process

© 2011 Fair Isaac Corporation. Confidential. 19 Beyond Predictions  Decision Analytics »Explicit modeling of your available decisions »Broader set of outcomes, constraints and objectives considered InputsDecision Outcome (Goals, Constraints and Objectives) Premium Claim Loss Expense Conversion Commission # of Policies Loss Ratio Application Distribution Information Financial History External Data Additional Policy Data »Coverage Amts »Price/Tier

© 2011 Fair Isaac Corporation. Confidential. 20 Decision Optimization »Solves for profit-improvement risk management strategies »Uses permutations on key constraints to evaluate alternatives Decision Refinement »Refines strategies for interpretability, robustness and ease of implementation »Manages the portfolio of risks along different dimensions and alternative levels of detail Decision Modeling »Evaluates and monitors data that would impact decisioning »Builds a graphical model for one or more decisions »Establishes mathematical relationships within key variables Decision Deployment »Incorporates optimized strategies into core processing solutions immediately »Manages and maintains the decisioning strategies to efficiently respond to market demands and changes Decision Optimizer Four Key Steps

© 2011 Fair Isaac Corporation. Confidential. 21 Decision Analytics Supporting Technologies TechnologyDescriptionUses Modeling, Optimization, and Refinement FICO™ Model Builder »Analytics for forecasting future individual behavior »Utilizes analytics to define decision trees that optimize the strategy that has been chosen »Improve risk assessment of customers »Target marketing opportunities »Improve use of information in portfolio management FICO™ Decision Optimizer »Analytic techniques for identifying best actions or treatments to meet objective under constraints »Simulates offerings to align decisioning with organization strategies »Design strategies that increase profit, response, other key metrics »Manage the portfolio of risk at a local market or agency level Deployment FICO™ Blaze Advisor ® business rules management system »Software for defining, testing and executing rules, processes and strategies »Make instant, consistent decisions in real time, across the enterprise

© 2011 Fair Isaac Corporation. Confidential. 22 © 2011 Fair Isaac Corporation. Confidential. 22 Open Discussion

© 2011 Fair Isaac Corporation. Confidential. 23 Discussion Topics »Most pressing challenge in bringing new products to market »Customer segmentation strategies—sharing what works and what doesn’t »The practice of using CBIS, custom models or both—advantages and disadvantages »The use of Optimization Technology for Insurance

Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation's express consent. © 2011 Fair Isaac Corporation. 24 THANK YOU January 12, 2011