Denver, CO--Valen Technologies, a provider of intelligent predictive analysis and decision enabling software, announced the availability of a premium modification module for its predictive underwriting software, Risk Manager. The new module develops a sophisticated, multivariate pure premium model that underwriters use on a daily basis to surcharge and discount policies more effectively.
Underwriting profitability correlates not only to underlying risk but also to a carrier's ability to price-to-risk properly. Setting premium arbitrarily too high or too low can cause a carrier to lose customers to competitors or conversely lose money by not pricing to-risk-properly. To make policy decisions today, most underwriters use personal experience coupled with their firm's underwriting manuals. In some cases, insurance carriers have implemented rules-based underwriting systems, rating engines and/or scheduled rating systems. While these technological approaches are generally more accurate than an underwriter's intuition, they still rely heavily on human experience to develop their underlying rules.
Recent research on the science of human decision making maintains that experience and "intuition" based decision making for economic problems result in sub-optimal results. A human's over-optimism, stubbornness, getting too close, misplaced priorities and counterproductive regret are all systematic and predictable reasons that humans make poor economic-based decisions.
Research also shows that human decision making can improve dramatically with the use of multivariate decision making technology such as Valen's Risk Manager. Valen's new premium modification module for Risk Manager is the only predictive underwriting application that can build a sophisticated multivariate pure premium model using hundreds, even thousands of risk factors. The new module uses Valen's Decision Studio analytic engine to build complex models based upon historical data from policy, claims, applications, loss control, and underwriting databases. Underwriters then use the models on a policy-by-policy basis to obtain premium modification advice on manual rates.
"At the end of the day, there is no such thing as a bad risk, only poorly priced risks. Carriers that do not have the ability to price-to-risk accurately will be less profitable," said Dax Craig, President and CEO of Valen Technologies. "Our new premium modification module provides underwriters with the ability to mathematically and objectively consider hundreds or even thousands of risk factors when modifying manual rates."
As the basis for Risk Manager, Valen Technologies' Decision Studio is one of the first analysis engines that uses computational learning theory to help make underwriting decisions. Traditional actuarial techniques are not only univariate in nature but they also assume that the underlying risk environment is linear. Linear models draw distinct linear lines between risk factors, missing subtle pockets of good and bad risk. Decision Studio models chaotic, non-linear insurance environments to produce more accurate risk recommendations.
The module is now available to implement as a stand-alone application or as a compliment to Risk Manager's risk selection application. Risk Manager's modules are available as a Web service or as a licensed product.
