Section G Regulation of Insurance: CASTF: Predictive Models

Question 1

How could insurers use of predictive analytics & big data benefit both consumers and the insurers themselves:

Answer 1

• Can reveal insights into the relationship betweeen consumer behavior and the cost of insurance
• Can lower the cost of insurance
• Can provide incentives to consumers to mitigate losses

Question 2

It is important to develop regulatory best practices that both:

Answer 2

• Do not create unnecessary/ unfair barriers for insurers (which will also have an adverse impact on consumers)
• Provide a baseline of analaysis for regulators to review the filings

Question 3

Advantages of having best practices for reviewing predictive models:

Answer 3

Question 4

Best practices should help the regulator understand:

Answer 4

• Is the predictive model cost based?
• Is the predictive model compliant with state law?
• How the model improves the rating plan?

Question 5

How should the review of predictive models ensure that the selected rating factors produce rates that are not excessive/ inadequate/ unfaily discriminatory.

Answer 5

Question 6

How should the review of predictive models obtain an understanding of the data used to build & validate the model

Answer 6

Question 7

How should the review of predictive models evalaute how the model interacts with and improves the rating plan

Answer 7

Question 8

How should the review of predictive models enable competition and innovation to promote growth/ financial stability/ efficiency of the insurance marketplace

Answer 8