St. Johns Insurance Company to adopt Milliman competitive intelligence tool

Milliman today announced that St. Johns Insurance Company has adopted Pixel™, a competitive intelligence tool for property and casualty insurance companies, along with Milliman’s proprietary market baskets.

Pixel is a web-based, interactive platform designed to give marketing executives, product managers, and actuaries a comprehensive and customized view of the market. Companies can view their own data in Pixel, but they can also license Milliman’s market baskets, which include competitor premiums for hundreds of thousands of policy profiles calibrated to represent various state markets.

“In a highly competitive market the need to price the insurance product to maintain market share and ensure a profitable profile is highly critical,” said Reese I. Bowen, president at St. Johns Insurance. “The ability to drill down to regional and territory levels for an assessment of the market’s view of price is invaluable. To replicate Milliman’s market basket approach and provide accurate competitor premiums would require an extraordinary amount of time and money. Pixel is by far the most cost effective and efficient manner to perfect product pricing in any market.”

“Pixel’s user base is growing rapidly as sophisticated insurers recognize the competitive opportunity for early adopters,” said Milliman Principal Nancy Watkins. “We are seeing a huge amount of interest in the market baskets that we offer on the Pixel platform, since they allow companies to get started immediately on comprehensive analyses without doing any data preparation.”

Pixel applies advanced data visualization and machine learning techniques behind the scenes in an easy-to-use tool that analyzes premiums for a given company relative to the competition. Users can filter markets by geography and type of risk, and drill down into the variables that most affect their competitive position. Results are output in user-friendly datasets, charts, and maps that can easily integrate with other software. This information is useful not only in setting premiums, but also in arming agents with valuable insight and in supporting the regulatory process.

To read more about Pixel, click here.

Solvency II: A natural role for actuaries?

July 22nd, 2015 No comments

Cantle-NeilThe introduction of the new European insurance regulation regime, Solvency II, will fundamentally change the regulatory roles of actuaries working in both life insurance and nonlife insurance. Milliman’s Summer 2015 edition of Issues in brief features an article entitled “Actuaries under Solvency II” which considers roles where actuaries, under Solvency II, can add value. The article also assesses roles where actuaries are specifically required, or are natural candidates, to fulfill the updated controlled functions envisaged by the Prudential Regulation Authority (PRA).

The future role of actuaries under Solvency II represents a hot topic in the insurance industry today. The actuarial function, as introduced by the Level 1 Framework Directive under Solvency II, is a natural role for actuaries to fill. However, the exact structure of this function, the level of overlap permitted between it and other key functions and activities of a firm, as well as the specific requirements of the individuals who perform it, are not yet entirely clear.

While it is not expected that the Solvency II actuarial function will introduce unfamiliar tasks for actuaries, there are a number of differences to be observed. For example, when comparing the tasks with the current UK actuarial functions required under Solvency I, at least two differences are apparent:

• Rather than being limited to a single individual, the Solvency II actuarial function may be structured in a range of ways, e.g., a group of people.
• There is no explicit requirement for the Solvency II actuarial function to be conducted by qualified actuaries (although proposed changes to the PRA Rulebook seem to suggest this is required where the function is outsourced).

Areas where actuaries are either natural candidates or where they can add value following the implementation of Solvency II include:

• The role of the with-profits actuary in the UK
• First-line activities such as underwriting, pricing, reinsurance management, or asset management
• Independent and external reviews of the output submitted to the regulator and public

This article was first published on LinkedIn.

Measuring risk culture

July 20th, 2015 No comments

Cantle-NeilRegulators across the world are increasingly focused on risk culture within organizations. Many regulators are introducing changes that require boards to establish, shape, and monitor their risk cultures. The article “One measure of culture, please,” published in the Summer 2015 issue of Milliman’s Issues in brief, focuses on an approach to this cultural challenge that is based upon a uniquely comprehensive framework for measuring risk culture, utilizing proven academic theory to assess risk culture across several dimensions.

These dimensions represent the natural way that risk management activities can be carried out—for example, whether the behavior and practices used to identify risks follow well-established processes, or whether the time spent identifying risks is focused appropriately on identifying those risks that could put the organization at greatest risk of failure. Furthermore, this framework raises the questions in a non-pejorative manner, such that the individual is asked to give an opinion on the behaviors and practices observed. This avoids unintended bias and manipulation.

It is important to note that there is no “right” or “wrong” risk culture. Instead, there is a need to determine the most “appropriate” risk culture that will make sure the behaviors and practices observed fit best with an organization’s risk framework and appetite—its risk culture. Hence, a key first step is to determine the most appropriate risk culture across the risk management activities. This serves as an internal benchmark that can provide richer insight for a firm to assess its performance and the extent of any discrepancy between the risk culture that it espouses and the risk culture it currently has.

A case study is included in this article to help illustrate the principles involved. The challenges that exist for companies in measuring and diagnosing the risk culture within their organizations, together with the regulatory cultural push for boards to actively demonstrate that they have embedded the risk culture that works best for them, means that firms must select an approach that truly provides the means to get beneath the skin of an organization’s risk culture.

This article was first published on LinkedIn.

Categories: Risk Tags: ,

Milliman Integrate™

July 17th, 2015 No comments

The Integrate platform takes a uniquely holistic, forward-looking approach to the automation and governance of actuarial modeling and reporting. Built around MG-ALFA, Milliman’s industry-leading financial modeling system, and powered by Microsoft Windows Azure, Integrate represents a reimagining of the relationship between people, processes, and technology.

Launched in 2012, it is the first industrialization solution that is proven to manage risk, maximize efficiency, and unlock the full potential of the actuarial staff. This video showcases how Integrate reinvents the way the world’s life insurers model risk.

To learn more about Integrate, click here.

Profiling Milliman Integrate

July 16th, 2015 No comments

Milliman IntegrateTM is a cloud-based actuarial modeling solution for the life insurance industry. It provides insurers the resources needed to reduce the time spent on manual processes and increase the time spent on analyzing financial model results. This Microsoft Developer Network blog profiles Integrate as well as Paul Maher, chief technology officer of Milliman’s Integrate & MG-ALFA practice.

Here’s an excerpt:

It’s great to see the innovation that Milliman are driving in the cloud. Paul Maher, CTO – Integrate & MG-ALFA at Milliman, and ex-colleague of mine at Microsoft is leading the Product Development team building Integrate™.

Paul Maher began his career at a small actuarial firm in the U.K., building pension software, and transitioned to IT roles and leadership positions at Microsoft, KPMG, and others prior to joining Milliman in 2013. He has a passion for building software solutions that help solve challenging business problems. Contact Paul at LinkedIn.

Paul describes Integrate…

“Integrate, an end-to-end, revolutionary cloud-based system for the life insurance market, has been built on the Microsoft Azure platform and reimagines the relationships between people, process and technology. Integrate clients are able to run large actuarial jobs on-demand year round, benefiting from the Azure platform’s scale and extensibility in a pay-as-you-go business model.

Integrate addresses the modeling and reporting requirements of Milliman clients; these requirements include large, computationally intensive workloads that can vary in size and scale across the financial year.

Integrate was built by using Azure as a platform-as-a-service (PaaS), and delivered to our clients as a turnkey software-as-a-service (SaaS) solution. We received multiple benefits by running Integrate on Azure, such as:

• Faster time-to-market
• Reduced costs
• Increased scalability
• More flexibility and creativity

To learn more about Integrate, click here.

Milliman Risk Talks: Healthcare dynamics & ERM (Part 1)

July 14th, 2015 No comments

In the latest episode of Milliman Risk Talks, Mark Stephens and Vikas Shah discuss how enterprise risk management (ERM) helps organizations navigating the changing dynamics of the healthcare industry. The first video in a two-part series focuses on healthcare delivery, offering a perspective on the state of risk intelligence for providers. Part two addresses the same topic but from the viewpoint of the ever-changing health insurance industry.

To watch our Milliman Risk Talks series, click here.

UK pension reform opens the door of opportunity for insurers

July 10th, 2015 No comments

Cantle-NeilSince pension reforms have gone live in the UK, future retirees now confront a whole new set of attractive choices at retirement. But sitting alongside them are significant risks. Milliman’s latest edition of Issues in brief features an article entitled “Opportunity knocks for ambitious insurers” which explains how structures can be developed by insurers that provide individuals with guaranteed income for life, with flexibility to change income levels to reflect changing circumstances, and with the ability to combat the risk posed by inflation and pass residual funds to their dependents.

Surveys have shown that these types of protection and flexibility are among the highest priorities of retirees. The authors of a recent Milliman research paper are cited in this article on their belief that insured solutions ultimately can meet the widely varying objectives of retirees, adding real value in helping them mitigate associated risks. The question is: Will insurers step up to the challenge or will the opportunity be allowed to slip away?

The first step to building new solutions is to devise an investment strategy specifically designed to support the delivery of a sustainable rate of retirement income. Milliman research used in this article calculated sustainable withdrawal rates for various investment approaches. The sustainable withdrawal rate was determined as the income that could be taken (expressed as a percentage of initial fund value) over the expected lifetime of a retiree, allowing for inflationary increases with a suitably high probability of achievement.

This article examines retiree priorities in the context of the new reforms in the UK and concludes there is ample opportunity for insurers in this arena. It suggests that the reforms provide an attractive overall proposition to retirees, delivering considerable freedom to balance growth, liquidity, and security and to adjust that balance over time as circumstances change. It concludes the new reforms are eminently suited to the direction of travel of the retirement market.

This article was first published on LinkedIn.

Milliman launches enterprise risk management self-assessment platform

July 8th, 2015 No comments

Milliman today released Enterprise Risk Management (ERM) Self-Assessment, a platform that allows companies to benchmark ERM maturity levels and processes. Built on Milliman’s in-depth industry knowledge, the platform provides custom results based on a 10-15 minute questionnaire and produces a report specific to the company. This gives companies a mechanism for tracking ERM maturation over time and a way to understand how they stack up to the competition.

As organizations continue to adapt and evolve in today’s dynamic business environment, we believe that the value of ERM goes far beyond a compliance obligation, and that companies from all industries can obtain substantial business value from an integrated, collaborative ERM process. Traditionally companies have struggled to benchmark their ERM performance. With this platform, they can chart their progress and determine where to focus ERM efforts to maximize improvement.

The ERM Self-Assessment offers benchmarks in five key areas:

• Governance and culture
• Risk assessment and modeling
• Mitigation and controls
• Reporting and communication
• Integration and collaboration

Milliman ERM Self-Assessment is a research effort from the Milliman Risk Institute, a non-profit enterprise risk management research & development center staffed and supported by Milliman. Access to the Milliman ERM Self-Assessment is complimentary and open to the public.

For more information, click here, or send an email here.

This video introduces the ERM Self-Assessment and offers a helpful demonstration of the evaluation process.

Product considerations for Thai life insurers

July 2nd, 2015 No comments

A low interest rate environment has stymied the development of Thailand’s life insurance sector. In this Asia Insurance Review article (subscription required), Milliman consultants Michael Daly and Clement Bonnet discuss some product solutions that may help insurers meet their consumer needs.

Here is an excerpt:

What options are available to life insurers in Thailand in the wake of such challenges?

One could adopt a relatively passive “wait and see, ride out the storm” strategy, avoiding any re-pricing of existing products or development of new innovative products, instead subsidising margin compression on new business from profits generated from older business backed by higher-yielding bonds, and hoping fixed interest yields will rise. This strategy obviously carries material risks.

Alternatively, one could be more proactive and re-price existing “guarantee heavy” products. This may boost profit margins, but carries the risk that such products offering less attractive policyholder returns may struggle to sell, especially if competitors do not re-price. It also increases disintermediation risk if fixed interest yields do rise in the future.

Or one could be bolder and make more radical changes to product strategy, seeking to take advantage of areas of untapped potential that have arguably been overshadowed by the plethora of “X pay Y” conventional endowments sold to date.

…Can unit linked business ever be successful in Thailand, as it has nearly everywhere else in Asia? If low interest rates are to become the norm, perhaps there will be greater urgency given to clear some of the stumbling blocks that have historically held back the growth of unit linked business.

In many Asian markets such as Hong Kong, Singapore and Malaysia, we have seen strong sales of participating products in recent times. The ability of these products to combine upside investment potential with a downside cushion of investment guarantees has proved appealing to customers wanting to avoid locking into non-participating products offering low returns or taking the investment risk associated with unit linked products.

Participating products have been sold in Thailand for many years, of course, but companies offering versions with greater discretionary benefits have historically struggled, and in many cases, participating products are almost indistinguishable from non-participating products.

P&C insurers are droning up business

July 1st, 2015 No comments

Many industries are interested in using drones for commercial purposes, introducing new risks that property and casualty (P&C) carriers must consider. Milliman consultants Carl Ashenbrenner and Tom Ryan provide perspective in their article “Drones: Emerging commercial potential, emerging liabilities.”

Forecasting loss costs is difficult with any new product. Currently, there is a lack of historical exposure information and little claim data for drones. In order to estimate the loss costs, one would first need to consider the risks associated with drones. If we exclude malicious acts, there are many risks associated with drones:

• Property damage to the drone itself
• Property damage to drone accessories (cameras, applicators, other payload)
• Theft of drone/accessories
• Liability due to property damage caused by drone (accidentally flying through window, etc.)
• Liability due to bodily injury caused by drone (flying drone into person or object that causes bodily injury)
• Libel or slander due to privacy issues from data collection
• Cyber liability due to theft of data collected by drone
• Product liability from the drone manufacturer

The magnitude or severity of the liability associated with drones can range from a small amount to an extremely large amount. While many of the worst-case scenarios may be caused by malicious acts, it would be possible for some to occur because of accidental or careless acts of the drone operator. One of the worst-case scenarios would be a drone interfering with the takeoff or landing of a large commercial aircraft. While regulations are being written to avoid this terrible scenario, it is not out of the range of possible events. Other scenarios could include causing large traffic accidents, etc.

Once an incident has happened, the assignment of liability to responsible parties would occur. The aviation insurance market is well versed in assignment of liability among operators, manufacturers, and owners/lenders. However, new laws, regulations, and legal theories may complicate the process. In most aviation events, the airline is held to strict liability and needs to find contributing parties (manufacturers, airports, traffic control, other aviation parties) during the settlement of the claim. This may be similar for drones although there may be a systemic risk associated with manufacturing of drones, production of software to operate drones, leasing to irresponsible parties, etc. This could be further aggravated by many operators not wishing or being unable to purchase insurance in the first place.