1. 2002 CAS RATEMAKING SEMINAR PRODUCT DEVELOPMENT (COM - 20)
BETH FITZGERALD, FCAS, MAAA

2. Product Development What is the Process? Examples:
Employment-Related Practices Liability
Directors & Officers Liability
Viewpoint of Actuary

3. Outline of Process Product Need Business Case Proposal
Policy Form Development
Rule/Loss Cost Development
Filing Preparation
Statistical Impact
Marketing/Sales Plans
Future

4. Product Need
Customer Survey
Monitoring of Market

5. Business Case Proposal
Product Description
Business Risks
Financial Analysis

6. Business Case Proposal
Revenue Projections
estimate number of customers
how product is to be priced
Expense Projections
initial R&D of product
maintenance of product
IS costs
include expenses from all departments (Finance, Marketing, Sales, Legal, Government)

7. Policy Form Development
Research Coverages
Discuss Potential Coverages for Inclusion in Product
Draft Policy Forms & Endorsements
Discuss with Insurer Panels, Agents, Brokers, Risk Managers
Legal Approval

8. Rule Development - Other Than Premium Determination
Definitions
Eligibility
Rounding Premium
Minimum Premium
Additional/Return Premium
Cancellations
Description of Basic and Optional Coverages

9. Rule Development - Premium Determination
Decide on Rating Structure for Basic Coverage Premium
practicality vs. accuracy
exposure base
classification plan
vary rates by state, territory?
Decide on Rating Structure for Optional Coverages
ILF’s, deductible/co-payment relativities
Manual Rules Reviewed by Insurer Panels

10. Pricing of Loss Costs/Relativities
Understand Coverages - inclusions, exclusions, endorsements
Data Needs
Data Availability
Decide on Methodology
Discuss Methodology with Insurer Panels

11. Filing Preparation Loss Cost Filing
Conform to State Regulations/Statutes
Respond to Regulatory Concerns

12. Statistical Impact Determine Future Ratemaking Statistical Needs
Balance Data Needs with Practicality/Cost of Data Collection
May Collect More Detail Than Used in Rating (e.g. territory, individual class)
Discuss with IS & Insurer Panels

13. Marketing/Sales Plan Decide on Target Customers
Prepare Announcement Material for Customers
Coordinate with Internal Staff
Sales, Marketing, Finance
Follow-up/Feedback

14. Future Ratemaking Develop/Modify Report Systems
Monitor Statistical Data
Determine Ratemaking Methodology for Updating Pricing
short - term
long - term

15. Future
Coverage Enhancements
Industry Data Compilations