Dan and Tom discuss the rate indications and give some tips on best practices.

Tom Torcia, Chief Analytics Officer at MCA, here with Dan Post, our Chief Actuary. I want to spend a little bit of time today talking about the rate indications process. Dan, obviously, I think some important current trends in the marketplace. Maybe first, you could talk a little bit about the indications process. I think most probably think of it as rigid. In your view, how would you describe someone coming at the indications process as formulaic and rigid?

It is formulaic in that there are a set of formulas. There’s the actuarial math that you need to follow, but that’s the science part of it. And there’s also the art, which I think is important. It’s important to be able to flex some of those assumptions, to incorporate growth, mix changes, any kind of anomalies in the data. You must really analyze what’s going on and use that data to figure out how those formulas either apply or don’t apply to what you’re looking at.

In the indications process, Dan, what value can you unlock beyond just the indications and the execution of the filing package and filing requirements?

Yeah, there’s so much underlying the data that if you look at those trends, if you see how the book is performing and really dive in deeper, you can unlock some of that, some of those insights in the data. So, looking at where there might be some soft spots in the loss performance, where there might be some underlying trends emerging and then making sure that you’re up front with how that’s coming together when you’re talking about the indications.

All right, Dan, give us some tips and tricks. Business partners in the company structure, right. They’re interacting with their actuaries. What’s the best practice? How would you give feedback to the business partners that are interacting with their actuaries through the rate indication process?

Yeah, I think the best advice that I can give is have open communication, open dialog where there’s a sharing of ideas back and forth. If you’re just sending your data off to your actuaries, they’re chugging away at it for a few weeks and then coming back with a number. You’re not getting that value. The value is in really that interaction. Discussing the drivers of the trends, discussing the range around some of the assumptions that you have as well. I think it’s important to set that context and have that conversation together. Yeah, I love that.

All right, Dan, last question. Bring it home for us. A lot of companies right now, current market environment, seeing larger indications than they’ve probably seen in a long time. How would you provide counsel and feedback? The indication is probably higher than they’ve seen. Do you just simply take the indication, take full and move forward? I’m guessing that’s not the answer. How do you give some guidance and feedback to the folks you’re working with today?

I think it’s important to have a long- term approach where you’re really assessing what you need to do in the short term, what you need to do in the long term, how you should approach that with rate, how you should approach that with other levers you can pull as a business and really look at the indication as what it is. It’s an indication, it’s a directional guide for what you need to do. So, incorporating that and incorporating everything else that’s going on in the business to make that part of your strategy.

It’s never a simple answer. Right. But appreciate your time, your feedback, your guidance, and hopefully helpful for folks as they’re continuing to manage and monitor through a difficult market environment.