Early Progress in Rate Modeling
Since beginning your journey towards higher sophistication on the rate modeling side, what are some of the early wins or signs of progress that stood out to you?
For Idaho Farm Bureau, the biggest leap forward has been in rate modeling sophistication. Over the last decade, the team embraced modern, intuitive software - streamlining day-to-day work and making expertise more accessible.
“Modeling is the area where we've made the greatest strides forward over the last ten years,”
Jay Call, Director of Actuarial, Idaho Farm Bureau
These tools have allowed the team to move beyond traditional GLMs by incorporating penalization techniques and actuarial concepts like credibility. The result? More stable, reliable predictions that reflect meaningful long-term patterns rather than short-term fluctuations.
With improved spatial analysis capabilities, the team can now evaluate territory factors alongside primary modeling. This reduces the need for repetitive iterations. Enhanced diagnostics and documentation also allow actuaries to compare models more effectively and confidently identify the strongest approaches.
Envisioning the Ideal Pricing Workflow
If you could waive a magic wand and build your ideal pricing workflow - with no constraints - what would it look like?
Jay envisions a seamless, end-to-end pricing system that brings actuarial modeling and business decision-making together in real time.
In this ideal workflow, actuaries and business leaders would sit together, using the pricing platform live during discussions. They could visualize model curves, test assumptions, and adjust parameters on the fly - seeing immediate feedback.
The system would dynamically display modeled outcomes, current relativities, and proposed adjustments. Additional screens would instantly generate impact analyses, illustrating how premium changes affect the book of business across segments, profitability, and key metrics. Leadership could align on decisions, finalize the model, and prepare regulatory filings. This would all be within a single integrated environment.
Key Takeaways for Insurers Embarking on a Pricing Transformation
What is one key takeaway you would share with other insurers embarking on a pricing transformation?
Jay’s guidance is clear: start early and plan ahead.
One of the biggest challenges he sees is misalignment between business-defined rating manuals and policy administration systems. The business may think of several discounts as levels of a single variable, while the system treats each discount as a separate field. These inconsistencies often lead to surprises during implementation.
By identifying and addressing these disconnects early, insurers can avoid costly delays and set the stage for a smoother, more successful transformation.
