1. 1 External Data Sources 2008 CAS Ratemaking Seminar March 17-18, 2008 John Stenmark Consulting Actuary Actuarial Data Management Services

2. 2 External Data Sources Overview Why use (Zip Code based) Demographic Data Zip Code vs. Zip Code Tabulation Area Issues Some Possible Methodologies to Address those Issues Census.gov Data Guide Cartographic Boundary File Guide

3. 3 External Data Sources Why use (Zip Code based) Demographic Data Predictive Modeling allows/encourages the use of data outside of the rating variables and, in fact, outside of the company. The first external data that a company is likely to use is Demographic Data, usually by Zip Code. Predictive Modeling has two phases: the Modeling itself (usually frequency and severity based) and derivation of rates and relativities using the modeled data (frequency and severity combined into modeled pure premium) Demographic data is used in the Modeling Phase Especially useful in a multi-state database

4. 4 External Data Sources Zip Code vs. Zip Code Tabulation Area Issues The Problem Postal Zip Codes are not defined by Boundaries, but by postal routes. ZCTAs (as used in this presentation) were defined during the 2000 census as boundaries by the U.S. Census Bureau based, at least partially, on the U. S. Postal Zip Codes at that time and have not been changed. The Postal Zip Codes in your data do change quite often. Over time your insured postal zip codes (and the territory boundaries defined from those codes) will increasingly diverge from the ZCTAs. Therefore the Zip Code for a particular policy or claim may not have demographic data associated with it.

5. 5 External Data Sources Zip Code vs. Zip Code Tabulation Area Issues The Solution(s) Assign Derived Demographic Data elements by County (filling entire database) Then assign data elements by ZCTA where there is a match Disadvantage: Slight inaccuracy problem where Postal Zip is in a different geographic area from ZCTA Disadvantage: Precision is inconsistent (county demographics for some insureds and Zip for others) Advantage: Easy to apply

6. 6 External Data Sources Zip Code vs. Zip Code Tabulation Area Issues The Solution(s) Geocode company data Assign each policy/claim to ZCTA using U. S. Census Bureau boundary files. Assign ZCTA demographic data to policy/claim Disadvantage: More complex and time consuming (resource intensive) Advantage: Far more accurate

7. 7 External Data Sources Census Data Average Education Years Average Education Years Population Density Population Density Mean Age Mean Age Percent Rural Percent Rural Percent Farm Percent Farm Travel Time Travel Time Median Income Median Income Median year Owner occupied structure built Median year Owner occupied structure built Median year householder moved into unit Median year householder moved into unit Median value for all owner-occupied housing units Median value for all owner-occupied housing units Median price asked Median price asked Median selected monthly owner costs Median selected monthly owner costs Average Education Years Average Education Years Population Density Population Density Mean Age Mean Age Percent Rural Percent Rural Percent Farm Percent Farm Travel Time Travel Time Median Income Median Income There are numerous sources of demographic data but… The source for most of these data is the US Census Bureau at http://www.census.gov/. Many variables can be derived from this data. Some possible variables appear below:

8. 8 External Data Sources Census Data

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10. 10 External Data Sources Census Data

11. 11 External Data Sources Census Data

12. 12 External Data Sources Census Data

13. 13 External Data Sources Census Data ■ For step-by-step instructions for moving the data and the structure into a data base format (including screen shots), please see www.census.gov/support/SF3ASCII.html. ■ Structure files in Access97 and other formats are available at http://www.census.gov/support/2000/SF3/. ■ We are unable to provide one-on-one support for applications of the data to specific spreadsheets or data base software. So how do you use the data from these Zip Files? Very Cryptic Text Files An Access database is available (referenced in the Readme document.) The text below is from: ftp://ftp2.census.gov/census_2000/datasets/Summary_File_3/Arkansas/0README_SF3.doc

14. 14 External Data Sources Census Data To download SF3.mdb Click here:

15. 15 External Data Sources Census Data After Downloading SF3.mdb open the Access database Seventy six tables corresponding to the seventy-six zipped ftp files In addition a SF3GEO Table, SF3GEO Dictionary Table and a Tables Table These define the structure of the database

16. 16 External Data Sources Census Data Data is imported into the tables using the File – Get External Data – Import Command. You will need to change the file extensions from.uf3 to.txt for this to work. The geo files are fixed width the others are comma delimited The database has specs for each table and these can (should) be accessed using the Advanced button on the import wizard.

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18. 18 External Data Sources Census Data Use the “Tables” Table to select the columns that you want, then determine which files you need to import. Remember that the tables contain all geographic areas: State, County, Zip, Block, County/Zip, etc. You will need to work with one of those at a time. Summing the entire file will scale up your results somewhat

19. 19 External Data Sources Census Data The Tables Table The TEXT column provides the description of each data element The TABLE column provides the Table name (remember the data must be loaded into each needed table) The FIELDNUM column provides the Column Name that will contain the data element. In this case to get one stat (e.g. Average Education) a weighted average is required So to get Average Education the table (P037) tells us we must load Table SF30003 from file named la00003 and Select P037001 thru P037035

20. 20 External Data Sources Census Data The SF3GEO Table Indexed on LOGRECNO Column The NAME column provides the Description for each row The ZCTA5 Column provides the five digit Zip for the row Notice that there are partial Zips (split between Parishes/Counties)

21. 21 External Data Sources Census Data SELECT SF3GEO.ZCTA5, SF3GEO.AREALAND, SF3GEO.NAME, SF30003.P037001 FROM SF3GEO INNER JOIN SF30003 ON SF3GEO.LOGRECNO = SF30003.LOGRECNO WHERE (((SF3GEO.COUNTY) Is Null) AND ((SF3GEO.ZCTA5) Not Like "###XX" And (SF3GEO.ZCTA5) Not Like "###HH")) ORDER BY SF3GEO.ZCTA5; By joining SF3GEO and the selected table on LOGRECNO the demographic data is by columns and the geographic data is by rows. Note: Make sure the query selects only the geographic data desired. I. e. give it the smell test The following query: Yields:

22. 22 External Data Sources Cartographic Boundary Files So how do you use the data from these Zip Files? Very Cryptic Text Files An Access database is available (referenced in the Readme document). The text below is from: ftp://ftp2.census.gov/census_2000/datasets/Summary_File_3/Arkansas/0README_SF3.doc ftp://ftp2.census.gov/census_2000/datasets/Summary_File_3/Arkansas/0README_SF3.doc (but any of the 0readme.doc will do) ■ For step-by-step instructions for moving the data and the structure into a data base format (including screen shots), please see www.census.gov/support/SF3ASCII.html. ■ Structure files in Access97 and other formats are available at http://www.census.gov/support/2000/SF3/. ■ We are unable to provide one-on-one support for applications of the data to specific spreadsheets or data base software.

23. 23 External Data Sources Cartographic Boundary Files In addition to demographic data the Census Bureau publishes boundary files for each of its boundaries Remember - since Postal Zip Codes and Postal Zip Code definitions change over time and the Census Bureau redefined ZCTAs somewhat for the census there will be a mismatch between the boundary files and the Zip Codes in your experience database First go to: http://www.census.gov/geo/www/cob/bdy_files.html http://www.census.gov/geo/www/cob/bdy_files.html

24. 24 External Data Sources Cartographic Boundary Files From there: For 5-Digit ZIP Code Tabulation Areas (ZCTAs) go to: http://www.census.gov/geo/www/cob/z52000.html http://www.census.gov/geo/www/cob/z52000.html For County and County Equivalent Areas go to: http://www.census.gov/geo/www/cob/co2000.html http://www.census.gov/geo/www/cob/co2000.html

25. 25 External Data Sources Cartographic Boundary Files Three types of files on each page. For ZCTAs they are: Census 2000 5-Digit ZIP Code Tabulation Areas (ZCTAs) in ARC/INFO Export (.e00) format Census 2000 5-Digit ZIP Code Tabulation Areas (ZCTAs) in ArcView Shapefile (.shp) format Census 2000 5-Digit ZIP Code Tabulation Areas (ZCTAs) in ARC/INFO Ungenerate (ASCII) format Most mapping software will read the Shapefile format.

26. 26 External Data Sources 2008 CAS Ratemaking Seminar March 17-18, 2008 John Stenmark Consulting Actuary Actuarial Data Management Services (601) 955-3022 jstenmark@comcast.net

27. 27 External Data Sources 2008 CAS Ratemaking Seminar March 17-18, 2008 John Stenmark Consulting Actuary Actuarial Data Management Services (601) 955-3022 jstenmark@comcast.net