Let’s go back in time to the summer of 2007. The original iPhone had just been launched. Miley Cyrus was Hannah Montana. The San Antonio Spurs were NBA Champions, and LeBron James was the savior of Cleveland Cavaliers. Insurance Executives were only concerned about legacy replacement systems.
On the surface, the business outlook appeared positive. In reality, we were just weeks away from the collapse of Lehman Brothers and the financial crisis that came afterwards.
The summer of 2007 was also when Freedom Specialty decided to enter the Director and Officers Liability Insurance (D&O) market. Despite the impending financial crisis, Freedom Specialty committed to a multi-million dollar investments in an analytical underwriting system. Now fast forward seven years, Freedom Specialty has grown its D&O business to over $300m in annual direct written premium while maintaining a loss ratio that outperforms the industry.
The key areas that resulted in this success are:
- Data Sources – The underwriting accesses six distinct external sources and receives data from internal administration applications.
- Data scrubbing – Significant emphasis was placed on veracity of the data. Multiple data quality processes were implemented to improve its usefulness.
- Predictive model – Data is combined and fed into a model that uses multivariate analysis to determine pricing.
- Risk selection analysis – A one-page analysis of recommendations is produced for the underwriter.
- Integration with corporate systems – Once an underwriting decision is determined, statistical information is transmitted back to the administration and analytical underwriting systems.
To read more about the Freedom Specialty story, download the case study here.
As Freedom Specialty continues to innovate and prosper, the world has seen a lot of change during the past seven years. The iPhone, the iPad, and other mobile technology have transformed the business environment. Miley Cyrus is definitely NOT Hannah Montana , and today, Insurance Executives’ conversations revolve around Big Data, Hadoop and Analytics.
Of course in a sea of change, some things remain constant: San Antonio Spurs are NBA Champions and LeBron James is once again the future of Cleveland Cavaliers.