1. 1999 CAS RATEMAKING SEMINAR PRODUCT DEVELOPMENT (MIS - 32) BETH FITZGERALD, FCAS, MAAA

2. Product Development n Assume Product Need Is Identified n What is the Process? n Examples:Employment-Related Practices Liability & Auto Services Market Segment n Viewpoint of Actuary

3. Outline of Process n Business Case Proposal n Policy Form Development n Rule / Loss Cost Development n Statistical Impact n Marketing / Sales Plans n Filing Preparation n Announcement to Customers

4. Business Case Proposal n Product Description n Business Risks n Financial Analysis

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

6. Policy Form Development n Research coverages n Discuss potential coverages for inclusion in product n Draft policy forms & endorsements n Discuss with Insurer Panels, Agents, Brokers, Risk Managers n Legal Approval

7. Rule Development - Other Than Premium Determination n Definitions n Eligibility n Rounding premium n Minimum premium n Additional / return premium n Cancellations n Description of basic and optional coverages

8. Rule Development - Premium Determination n Decide on rating structure for basic coverage premium  practicality vs. accuracy  exposure base  classification plan  vary rates by state, territory? n Decide on rating structure for optional coverages  adjust basic premium additively or multiplicatively?  ILF’s, deductible relativities, co-payment relativities  additive dollar amounts for additional limit of insurance n Manual Rules reviewed by Insurer Panels & Legal

9. Pricing of Loss Costs / Relativities n Understand coverages - inclusions, exclusions, endorsements n Data needs n Data availability n Decide on methodology n Discuss methodology with Insurer Panels

10. Statistical Impact n Determine future ratemaking statistical needs n Balance data needs with practicality / cost of data collection n May collect more detail than used in rating (e.g. territory, individual class) n Discuss with IS & Insurer Panels

11. Future Ratemaking n Determine report system requirements n Test new or revised report systems n Determine ratemaking methodology for updating pricing  short - term  long - term