Linking Predictive Analytics and Underwriting at Freedom Specialty Insurance Company

A Case Study
by Michael Fitzgerald, July 15, 2014
Case Studies
Global

Abstract

Predictive analytics and experienced underwriting judgment are a powerful combination.

In the report Linking Predictive Analytics and Underwriting at Freedom Specialty Insurance Company, Celent explores how Freedom Specialty Insurance built, refined, and sustained a predictive analytic underwriting platform. 

Directors & Officers (D&O) is a specialty insurance product which provides indemnification for legal expenses and liability judgments when a policyholder is sued for negligent, reckless, or bad faith actions or omissions in the course of performing their duties. In determining the pricing, limits, and availability of this coverage, an underwriter considers multiple aspects involving the specific individual, their company, and the likelihood of legal actions (lawsuits).

In 2008, Scottsdale Insurance Company entered the D&O market and invested in a risk selection approach that fed external data to a predictive model in order to compliment underwriting intuition. ”The timing of their decision was interesting,” says Mike Fitzgerald, Senior Analyst and author of the report. “There was not an abundance of confidence in management performance as the American economy was collapsing. Their results, however, speak for themselves.”

This case study identifies lessons that others can use to harvest the benefits of analytics in their underwriting operations.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Introduction

1

The Platform

3

 

Technology

3

 

People

4

 

Process

4

Keys to Success

6

 

Next Steps

6

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