Project Management For Class Plan Projects CAS Special Interest Seminar on Predictive Modeling October 11-12, 2007 Jonathan White Hope Is Not a Strategic Plan 2 Project Management Basics Set research project goal Define project tasks Organize – work breakdown structure (WBS) – – – – Identify dependencies Sequence of tasks Resource requirements of tasks Duration of tasks Project schedule – Gant chart Project milestones 3 Planning Clear understanding of the business objectives – Where is the plan to be used – Channel/state/ – Marketing source – Product/business expectations – Current competitive position – Implementation strategy 4 Planning Clear research objectives – – – – – – Statistical methodology Software New data New variables Scope of analysis Required research infrastructure Defines Research Scope Research vision of end product IT / Operations / U/W … integration 5 Balancing Triangle SCOPE 6 Planning Environmental changes – Business strategy – Regulatory Vulnerabilities – Data – Methodology – Software Research contingencies – What if xxxx does not work? 7 Phases of a Class Plan Project 1. 2. 3. 4. 5. 6. Planning Data Equity Modeling Selection Implementation Monitoring 8 Data Internal – Previously used – New External – Hit rate Understand the data Data quality Significant potential for delays 9 Equity Modeling Many times the simplest phase Modeling options – Regression – Classification trees – Neural nets Dependent variable – Loss ratio – Claim frequency/claim severity – Pure premium 10 Equity Modeling Holdout sample Threshold for variable inclusion Statistical measures of overall model predictiveness Deliverables – Structure – Indicated factors Peer Review 11 Selection Recent performance vs. Modeling indications New plan vs. Old plan comparison – Dislocation – Conversations with the business – Percentage change vs. Observed loss ratio Cost benefit conversations 12 Percentage Change Vs. Observed LR 2.5 60% 50% Rel LR Avg change 40% 30% 1.5 20% 10% 1.0 0% Average change Relative loss ratio 2.0 -10% 0.5 -20% -30% 0.0 -40% Largest decr 2 3 4 5 6 7 8 9 Biggest incr Decile by average change 13 Selection Benefits analysis Price optimization – Data requirements – Analysis requirements Environmental changes – Internal – External 14 Benefits analysis Loss ratio/issue rate Requirements – Equity model (indicated class plan) – Quote data - Issue rate model – Retention data - Retention rate model (if applied to renewal business) – Re-rating capabilities – Competitor pricing data or proxy 15 Implementation Off-balance – Traditional – static environment – Dynamic – reflect mix changes Filing support – What do you do when loss ratios don’t mean very much? State exceptions – personal auto – Credit, driving record, prior carrier info – Balance efficiency and accuracy 16 Monitoring Key metrics – Loss performance – Issue rate – Operational metrics Importance of early reads – Leading indicators Benchmarks 17 Loss Performance Monitoring Determine key variables/niches Establish and calculate benchmarks Look for leading indicators – Claim frequency – Stabile, quick settling coverages – Cap severity – Credibility weight observed with benchmarks 18 Issue Rate Monitoring Leading indicator Problem of quotes Comparison points – Prior plan – Benchmark Do you believe the market or your equity modeling? 19 Hope Is Not a Strategic Plan 20