1. 1 ISO Confidential Material1 Predictive Modeling & Marketing

2. 2 – A quick peek at what Marketing says it does – “wallet share” – Risk scoring – Aligning marketing and UW – A quick peek at what Marketing says it does – “wallet share” – Risk scoring – Aligning marketing and UW Overview

3. 3 Sales and Distribution Producer Segmentation Market Planning Revenue Forecasting Cross sell and Up sell Retention and Profitability Underwriting Risk Selection and Pricing Portfolio Management Premium Adequacy Billing and Collections Management Claims Payment Accuracy Claim Collaboration > Fraud Detection > Subrogation > Risk Transfer > 3 rd Party Deductible > Reinsurance Recoverable General Organizational Overview An information business focused on risk taking. Make. Sell. Serve.

4. 4 Student Travel Car insurance Family needs Mortgage Expenditure Income $ over time Coverage At School Coverage Out of country Auto Insurance Life Home SVP Umbrella Customer Focus: Products across life stages As income increases, the needs for insurance grow

5. 5 Personal Auto PolicyHomeowners $250 Personal Umbrella $100K $300K $50K $300K $1.3 million $1 million Stackable Coverage can show ‘wallet share’ of customers and point out opportunities for cross-sell and up-sell

6. 6 Most Profitable ResponderNew Customer NOT Profitable Forced Churn Voluntarily Left You Next Most Profitable Target Market Prospect Responder Current Customers Former Acquisition Campaigns Cross-sell Campaigns Upsell Campaigns Attrition Prediction Forced Cancellation Winback Campaigns Segmentation Risk Selection Pricing Yield Management Customer Life Cycle Management Best Practice use of CLTV is to incorporate it into all stages during a customer’s lifecycle

7. 7 Case Study: Database Marketing Implementation Approach SERVICE DIFFERENTIATION BASED ON “PORTFOLIO POSITION” Most Profitable NOT Profitable Next Most Profitable Retention Programs Cross-sell / Up-sell Loss Control Services Agency Contact Re-underwriting Cross-sell / Up-sell Forced Churn (where legally appropriate) Price to Risk

8. 8 Portfolio View for Underwriting Analysis

9. 9 Grow Your Book in the Right Direction

10. 10 A vast array of CRM applications demand a common glue -- Analytics

11. 11 Universe of all Prospects Sales Pipeline Lead Qualification Lead Gathering and Targeting Selling, Contracting Hot Cold Customer Process Lead Opportunity Warm Sales Funnel Analyze, learn, grow customer Your Selected Prospects

12. 12  Mass  Targeted  Competitive Attention  Selective Attention  Breadth  Depth  Remember  Respond  Impression  Decision  Pay for Everyone  Pay for Targets General Advertising and Direct Mail – A Simple Comparison AdvertisingDirect Marketing

13. 13 Selection Factors Consumer Lists – Age – Income – Gender – Marital Status – Homeowner – Dwelling Type (home or apartment) – Mail order buying (by product type) – Interests – Presence of children – Geographical (zip, SCF, county, state, carrier route) Consumer Lists – Age – Income – Gender – Marital Status – Homeowner – Dwelling Type (home or apartment) – Mail order buying (by product type) – Interests – Presence of children – Geographical (zip, SCF, county, state, carrier route) Business Lists – SIC (Standard Industrial Classification) – Employee Size – Annual Sales/Revenue – Title – Any other information captured on subscription form (publications) – Corporate linkage information – # of years in business – Geographical (zip, SCF, county, state) – Credit information

14. 14 B2B Marketing Profile – Banking, Finance & Insurance Base: N= 47 Source: Forrester Consulting Survey for ABM

15. 15 Data Driven Campaign Management Targeted Marketing Cross sell Retention & Loyality Credit Risk New Product New Channels New Services Data Analysis Reporting OLAP DataMarket Research Analysis Mining Data Warehouse Data Driven Campaign management Segmentation & Scoring

16. 16 Personal Auto Risk Framework State Territory Vehicle Age & Symbol Limits & Deductibles Special Adjustments Environmental Risk Module: Weather, Street, Businesses, Traffic Density, Driving Patterns etc Vehicle Risk Module: Weight, Engine Size, etc. Class Driver History Module No Change Policy Risk Module Interactions of all Variables State VIN Address Personal Identifiers Address, Drivers, Vehicles Rating Plan Input

17. 17 ZIP Code 94109: A Tour The Tenderloin: "...the haunt of the low and vile of every kind. ….Licentiousness, debauchery, pollution, loathsome disease, insanity from dissipation, misery, poverty, blasphemy and death are there. And Hell, yawning to receive the putrid mass, is there also. “ Robert Louis Stevenson declared "Nob Hill, the Hill of Palaces, must certainly be counted the best part of San Francisco." Japantown Fishermen’s Wharf

18. 18 Small-Area Geography Overview

19. 19 Newark NJ Area Combined Relativity

20. 20 Combining Risk Scores for Marketing

21. 21 Competitive Advantage Loss $ Risk Carriers establish a base rate for each rating territory that represents the average expected loss cost. Base Rate

22. 22 Competitive Advantage Risk Carriers establish a base rate for each rating territory that represents the average expected loss cost. In reality there is a distribution of risk and expected loss costs, even within a territory. Base Rate Actual Costs Loss $

23. 23 Competitive Advantage Risk Carriers establish a base rate for each rating territory that represents the average expected loss cost. In reality there is a distribution of risk and expected loss costs, even within a territory. The Prescreen Score more closely follows the actual distribution of risk. Base Rate Actual Costs Prescreen Score Loss $

24. 24 Competitive Advantage Risk Carriers establish a base rate for each rating territory that represents the average expected loss cost. In reality there is a distribution of risk and expected loss costs, even within a territory. The Prescreen Score more closely follows the actual distribution of risk. Base Rate Actual Costs Prescreen Score Users of Prescreen can let their competitors waste resources chasing these marginal accounts! Loss $

25. 25 – Marketers can use sophisticated models – Portfolio Management is a key to success – Risk-based pricing helps a lot – It is not a competitive advantage if you don’t use it – Marketers can use sophisticated models – Portfolio Management is a key to success – Risk-based pricing helps a lot – It is not a competitive advantage if you don’t use it Summary