Predictive modeling was a point of focus as last month’s Casualty Actuarial Society Spring Meeting in Phoenix, as it has changed the way policies are priced and the way actuaries work.
At the meeting’s session “The Revolution and Evolution of Predictive Modeling,” Claudine Modlin, a senior consultant at Towers Watson, laid out how far predictive analytics has advanced insurance pricing in the past decade. At the end of the 20th century, Modlin said, insurers were still bound to mainframe computers and highly aggregated data sets. Rating plans were less sophisticated and it was easy for a company to understand its competitors’ plans. Rating plans were finalized based on the collective judgment of underwriters and actuaries, with little data-driven guidance in how and where to deviate from the expected costs.
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