BAS 2020 Block Dental Case Competition

Team 28Wilson Yu, Yunqi Shi, Boyang Wan, Hengyuan Qi

1

Probability Model

Profit &

Revenue Opitimization Strategies

Final Strategy

Implications

C O N T E N T

1

2

3

4

Data

Analysis

Probability

Model3

Data

Analysis

Logistic Regression

4

Probabilistic model

Binary dependent variable

Linear method

Data

Analysis

Considerations For Factors

5

Strong Association

High Accuracy

Independent Factors

Data

Analysis

Considerations For Factors

7

Strong Association

High Accuracy

Independent Factors

Data

Analysis

Probability Model

8

Pro

ba

bility o

f Win

Data

Analysis

Profit &

Revenue Optimization

Strategies

9

Data

Analysis

10

Reasoning Assumption

Data

Analysis

11

Formula

Revenue= Premium × Probability

Profit = (Premium-Claims) × Probability

Data

Analysis

● Expected Loss Ratio, Claim & Premium Based on Two Strategies

12

Revenue Max

Year 1 Year 2 Year 3

Expected

Loss Ratio86% 84% 81%

Expected

Premium$102m $98m $95m

Expected

Claim$88m $83m $78m

Profit Max

Year 1 Year 2 Year 3

Expected

Loss Ratio71% 60% 53%

Expected

Premium$87m $74m $64m

Expected

Claim$62m $45m $34m

Data

Analysis

Final

Strategy13

Data

Analysis

14

Maximize

Revenue

Set Loss

Ratio =

70%

Weights

0%

10%

…...

? %

…...

90%

100%

100%

90%

……

1 - ?%

......

10%

0%

Blend of 2 Strategies

39 % 61 %

Data

Analysis

Average of Rate Increase

LR Bands Year 1 Year 2 Year 3

(0,25] -2.3 -2.3 -2.2

(25,50] 0.4 0.5 0.7

(50,70] 3.3 3.5 3.6

Benchmark : LR = 70%

(70,100] 9.2 9.0 8.8

(100,150] 17.2 16.1 15.3 15

Data

Analysis

16

1694

Data

Analysis

Average of Rate Increase

LR Bands Year 1 Year 2 Year 3

(0,25] -2.3 -2.3 -2.2

(25,50] 0.4 0.5 0.7

(50,70] 3.3 3.5 3.6

Benchmark : LR = 70%

(70,100] 9.2 9.0 8.8

(100,150] 17.2 16.1 15.3 17

4

9

16

Data

Analysis

18

Implications to Management

Large Rate Increase

Fewer Clients

Low Market Share

Less Potential

Large Rate Increase

Rejecting Customers

Moral Concern

Reputation Decline

Data

Analysis

19

Implications to Management

Large Rate Increase

Fewer Clients

Low Market Share

Less Potential

Data

Analysis

20

Implications to Management

Large Rate Increase

Rejecting Customers

Moral Concern

Reputation Decline

Data

AnalysisImplications

21

Trade-off?

Los Ratio Revenue

Loss ratio

Data

Analysis

Model Improvements

23

Win Rate

Loss Ratio

Current Rate

Increase

Data

Analysis

Model Improvements

25

Win Rate

Loss Ratio

Current Rate

IncreaseChannel

Previous Rate

Increases

Data

Analysis

Strategy Improvement

26

Current

3 Weights

Fast

Proposed

15,000+ Rate

Increase

Flexible

Other way to reduce loss

ratio?

Underwriting

Guideline

New

Product

Thank you!

Q & A28