Insurance Analytics

Insurance Analytics

Definition of
Insurance

• Insurance is the pooling of
fortuitous losses by
transfer of such risks to
insurers, who agree to
indemnify insureds for
such losses, to provide
other pecuniary benefits
on their occurrence, or to
render services connected
with the risk

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Basic • Pooling of losses
Characteristics • Spreading losses incurred by the few over the entire
group
of Insurance • Risk reduction based on the Law of Large Numbers

• Payment of fortuitous losses
• Insurance pays for losses that are unforeseen,
unexpected, and occur as a result of chance

• Risk transfer
• A pure risk is transferred from the insured to the
insurer, who typically is in a stronger financial
position

• Indemnification
• The insured is restored to his or her approximate
financial position prior to the occurrence of the loss

Requirements • Large number of exposure units
of an • to predict average loss

Insurable Risk • Accidental and unintentional loss
• to control moral hazard
• to assure randomness

• Determinable and measurable loss
• to facilitate loss adjustment
• insurer must be able to determine if the
loss is covered and if so, how much
should be paid.

Requirements • No catastrophic loss
of an • to allow the pooling technique to work
• exposures to catastrophic loss can be
Insurable Risk managed by:
• dispersing coverage over a large
geographic area
• using reinsurance
• catastrophe bonds

• Calculable chance of loss
• to establish an adequate premium

Requirements • Economically feasible premium
of an • so people can afford to buy
• Premium must be substantially less than the
Insurable Risk face value of the policy

• Based on these requirements:
• Most personal, property and liability risks
can be insured
• Market risks, financial risks, production risks
and political risks are difficult to insure

ICICI Insurance

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Some things last FOREVER…

Some relationships like….

…marriage

This material is strictly meant for circulation within the organization/ solely for training and/or education of the employees of ICICI Prudential Life Insurance
Co. Ltd. or its advisors, corporate agents or brokers and should not be further circulated or used for presentation to a prospect or general public at large.

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Some things last FOREVER…
Some relationships like….

…marriage
…friendship

This material is strictly meant for circulation within the organization/ solely for training and/or education of the employees of ICICI Prudential Life Insurance
Co. Ltd. or its advisors, corporate agents or brokers and should not be further circulated or used for presentation to a prospect or general public at large.

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Some things last FOREVER…
Some assets like….
…your own home

This material is strictly meant for circulation within the organization/ solely for training and/or education of the employees of ICICI Prudential Life Insurance
Co. Ltd. or its advisors, corporate agents or brokers and should not be further circulated or used for presentation to a prospect or general public at large.

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Some things last FOREVER…
Presenting an Insurance plan…
…which lasts FOREVER

This material is strictly meant for circulation within the organization/ solely for training and/or education of the employees of ICICI Prudential Life Insurance
Co. Ltd. or its advisors, corporate agents or brokers and should not be further circulated or used for presentation to a prospect or general public at large.

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FOREVER???
But does a plan that lasts FOREVER imply that….

…I need to PAY FOREVER?

…I get no benefits during my lifetime?

…my goals remain unfulfilled if I die during my earning years?

NO!

This material is strictly meant for circulation within the organization/ solely for training and/or education of the employees of ICICI Prudential Life Insurance
Co. Ltd. or its advisors, corporate agents or brokers and should not be further circulated or used for presentation to a prospect or general public at large.

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Presenting ICICI Pru Whole Life…
With ICICI Pru Whole Life, you…

Pay only for a limited term

And get benefits for a lifetime

Get a lump sum payout at the end of this term

To help you meet your financial goals

Get double cover during your earning years

To fulfill your goals even in your absence

Get covered for the remaining years of your life

To leave your family an inheritance

This material is strictly meant for circulation within the organization/ solely for training and/or education of the employees of ICICI Prudential Life Insurance
Co. Ltd. or its advisors, corporate agents or brokers and should not be further circulated or used for presentation to a prospect or general public at large.

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ICICI Pru Whole Life: theSavpinglsan for life….

DOUBLE Sum kitty

Assured

coverage during

PPT

Pay regular premiums for a limited term End of premium
paying term

Get regular bonus additions Whole life cover

To achieve your GOALS To leave an INHERITANCE

For your TODAY!! For your family’s
TOMORROW!!

This material is strictly meant for circulation within the organization/ solely for training and/or education of the employees of ICICI Prudential Life Insurance
Co. Ltd. or its advisors, corporate agents or brokers and should not be further circulated or used for presentation to a prospect or general public at large.

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Key benefits Insurance protection till age 100
Whole life
cover Get a cover of double the sum assured until your
premium paying term (PPT)
Double Sum
Assured

Savings benefit Lump sum benefit which includes sum assured and all
accumulated bonuses at end of PPT
Enhanced
coverage Enhance your coverage through riders –ADBR, CIR and
IBR
Tax
benefits Get tax benefits under Section 80C & 10(10D) of
Income Tax Act, 1961

This material is strictly meant for circulation within the organization/ solely for training and/or education of the employees of ICICI Prudential Life Insurance 18
Co. Ltd. or its advisors, corporate agents or brokers and should not be further circulated or used for presentation to a prospect or general public at large.

How does the plan work?
• You need to choose the following:

Sum Assured (SA) Premium payment Mode of premium
term (PPT) payment

• At the end of PPT you will receive:

Sum Assured Reversionary bonuses Terminal bonus
(Declared per year till PPT) (At the end of PPT)

• Insurance cover during PPT:

Double Sum Assured Reversionary bonuses
(Declared regularly till PPT)

• Insurance coverage for whole of your life after PPT:

Sum Assured

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ICICI Pru Whole Life at a glance

Policy term Whole life
10 / 30 years
Min / Max premium payment 0 / 60 years
term 30 / 70 years
Yearly, Half yearly or Monthly
Min/ Max age at entry*

Min/ Max age at end of
premium payment term*

Modes of Premium Payment

*Lower terms are not available at higher ages. Please check Login Assistant to check eligibility of your case.
*Age completed birthday

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Product details

Benefits during PPT

Benefits after PPT

Product pitches

Enhanced protection with riders

Discounts and loadings

Policy discontinuance and revival

This material is strictly meant for circulation within the organization/ solely for training and/or education of the employees of ICICI Prudential Life Insurance
Co. Ltd. or its advisors, corporate agents or brokers and should not be further circulated or used for presentation to a prospect or general public at large.

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Product details

Benefits during PPT

Benefits after PPT

Product pitches

Enhanced protection with riders

Discounts and loadings

Policy discontinuance and revival

This material is strictly meant for circulation within the organization/ solely for training and/or education of the employees of ICICI Prudential Life Insurance
Co. Ltd. or its advisors, corporate agents or brokers and should not be further circulated or used for presentation to a prospect or general public at large.

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Savings Benefits: Achieve your goal

Invest regularly in a secure savings plan CChhiillYddo’H’ssuoErMudGsuaoercariltaigoen

30 yrs 45 yrs

Increase your savings corpus through yearly bonus additions

Unfortunate death At the end of savings period

2 X SA + Accrued bonuses SA + Acc. Bonus + TB

Achieve your goals NO MATTER WHAT!!!

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SavinHeglpss byoeu ncreeafteita corpus to meet your desired goal at the end
of the PPT

Sum Assured (SA) Reversionary bonus Terminal bonus

Reversionary bonus  Declared as a % of SA at end of every policy year and
added to the SA

 Bonus once declared is guaranteed

Terminal bonus  Payable on death or at the end of PPT
 Terminal bonus is not guaranteed

* The rate of the bonus will depend upon the performance of the participating fund

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How is the reversionary bonus calculated?
• It will be calculated basis simple interest method

• Example : For Rs. 1 Lac SA and assumed bonus rate of 4%
every year)

Year Sum Assured Bonus amount Sum Assured including bonus
(Rs) (Rs) for the year additions
1,04,000
Year 1 1,00,000 4,000 1,08,000
4,000 1,12,000
Year 2 1,00,000 4,000 1,16,000
4,000 1,20,000
Year 3 1,00,000 4,000 1,40,000
4,000
Year 4 1,00,000

Year 5 1,00,000

Year 10 1,00,000

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Product details

Benefits during PPT
Benefits after PPT
Product pitches
Enhanced protection with riders
Discounts and loadings
Policy discontinuance and revival

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Whole life benefit: Legacy for your family
Sum Assured for life with no additional premiums

End of PPT Age 100

Inheritance Leave a legacy for your wife or child
 Lump sum payout of SA in case of your demise

anytime after PPT till age 100 years
 On survival till100 years of age, SA will be payable

as a maturity benefit

Emergency fund Avail a loan facility equivalent to 80% of the surrender value
in case of an emergency

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Product benefits in detail

Benefits during PPT

Benefits after PPT
Product pitches
Enhanced protection with riders

Discounts and loadings
Policy discontinuance and revival

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Case study

Meet Mr. Karan

Age 35 years

Profession Garment trader

Income Rs. 20 lacs per annum

Dependents  Wife – Sunaina

 Daughter – Richa (8
years old)

This material is strictly meant for circulation within the organization/ solely for training and/or education of the employees of ICICI Prudential Life Insurance
Co. Ltd. or its advisors, corporate agents or brokers and should not be further circulated or used for presentation to a prospect or general public at large.

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Mr. Karan’s concerns…
• Richa is the most important person in my life
• Her marriage is my MOST important responsibility
• I would want her to be married by age 23 yrs
• I need to save 20 lacs for her marriage

I am worried about who will take care of her in case I am not around

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Solution
Mr. Karan’s most important responsibility – Richa’s
marriage is secured, even if he is not around

Premium of Rs 1 lac p.a. Richa’s marriage 99
Age Payout of Rs 20 lac
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In case Karan dies… After age 49 yrs….
Family gets Rs. 21 lac + vested bonus
Mr. Karan has a ICICI Pru
Rincha’s marriage is secured Whole life cover of Rs 10.5 lac

Double cover in earning years!!

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Power of Whole life

1 He does not need to pay any further premiums
2 He may find it difficult a life cover to get at later age
3 Whole life cover can be a security for wife
4 Whole life cover can be a gift to Richa
5 He can take an emergency loan at old age

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Case study

Meet Mr. Rahul Khanna

Age 40 years
Profession
Works at a FMCG
Income company in
Dependents marketing

Rs. 15 lacs per
annum

Wife and two
children

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Discussion with Rahul Khanna
• Age 40 yrs  Successful career

• Income – 15 lac  Can save 10% of income

 Investments  Fixed income profile
 10 lac in FD  Risk averse
 2 lac in MF  Saving for children

 Wants to retire at  Retirement plan to meet
age of 55 yrs expenses

 Worried about inflation

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Solution Tax free pension increasing with inflation

 15 Whole life policies with total SA of Rs. 19.8 lacs

 Term – 15, 16, 17, 18… up to 30 years

Increasing @ 6% p.a. Rs. 4.5 lac

Premium of Rs. 1.4 lac p.a. Rs. 2 lac

Age

40 55 70
Tax free pension adjusted for inflation

In case Rahul dies… Whole of lifeTocotvaelrPfoaryRosu. t19.8 lac
Family gets Rs. 39.5 lac + vested bonus  Rahul getsRRss.. 6466.5lalcac

FamRailhyu’slfpinaaynsciaRlsn.e2e1d.s7sleaccured  Family gets Rs. 19.8 lac

This material is strictly meant for circulation within the organization/ solely for training and/or education of the employees of ICICI Prudential Life Insurance
Co. Ltd. or its advisors, corporate agents or brokers and should not be further circulated or used for presentation to a prospect or general public at large.

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WorkingsRahul pays Rs. 21.7 lac He gets Rs. 46.5 lac + 19.8 lac whole life cover

Age ( yrs) Premium Death Age ( yrs) Net Payout Death Benefit
Benefit 55 200,000 5,015,067
40 144,715 56 212,000 4,834,723
41 144,715 4,038,989 57 224,720 4,649,954
42 144,715 58 238,203 4,459,579
43 144,715 4,122,064 59 252,495 4,262,551
44 144,715 4,205,138 60 267,645 4,055,606
45 144,715 4,288,212 61 283,704 3,861,863
46 144,715 4,371,286 62 300,726 3,659,877
47 144,715 4,454,361 63 318,770 3,448,922
48 144,715 4,537,435 64 337,896 3,228,394
49 144,715 4,620,509 65 358,170 2,991,477
50 144,715 4,703,583 66 379,660 2,755,516
51 144,715 4,786,657 67 402,439 2,508,257
52 144,715 4,869,732 68 426,586 2,249,238
53 144,715 4,952,806 69 452,181 2,702,683
54 144,715 5,035,880 70 + 1,977,958
5,118,954
5,202,029

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Product details

Benefits during PPT

Benefits after PPT

Product pitches
Enhanced protection with riders
Discounts and loadings
Policy discontinuance and revival

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Enhanced protection with riders
 Protection against 9 critical illnesses
Critical illness
rider  Rider SA is payable only on survival for 28 days post the
diagnosis of a critical illness

Accidental &  On death due to an accident rider Sum Assured will be
Disability payable

Benefit Rider  Twice the SA will be payable, in case of accidental death
while traveling by mass transport

 In case of total and permanent disability due to an
accident, 10% of the rider SA is paid out every year for 10
years

Income Benefit  On death 10% of the rider SA will be paid out every year
Rider for the remaining years of PPT

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Product details

Benefits during PPT

Benefits after PPT
Product pitches
Enhanced protection with riders
Discounts and loadings

Policy discontinuance and revival

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Large• Sum Assured discount premium*

Large Sum Assured discounts on the

Sum Assured (Rs.) Rebate per thousand SA
Less than 2 lacs Nil
4.3
2 lacs to less than 3 lacs 5.7
3 lacs to less than 5 lacs 6.7
5 lacs to less than 10 lacs 7.5
Greater than or equal to 10 lacs

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Moda• l loading paying frequency other than yearly, a

For premium
modal loading will be levied on the premium including
any extra premium

Mode % of premium
Monthly 4.5%
Half yearly 2.5%
Nil
Yearly

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Product details

Benefits during PPT
Benefits after PPT
Product pitches
Enhanced protection with riders
Discounts and loadings
Policy discontinuance and revival

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Surre•nTdheeprolVicay lwuilel acquire a Guaranteed Surrender Value 43
on payment of premium for at least 3 policy years
• It will be equal to 35% of the base policy premiums
paid less the first year's premium.
• Any survival benefits paid, extra premiums paid and
premiums paid towards riders shall be excluded. A
discounted value of the bonuses allocated will also be
added
• The actual Surrender Value payable will depend on
Sum Assured, vested reversionary bonus, policy term
and the number of premiums paid.

Paid u• pOncpeothleicpoylicy has acquired a Surrender Value and no
future premiums are paid, the policy may continue as a
'Paid-up' policy for a reduced Sum Assured (Paid-up Sum
Assured), as indicated below:

Paid-up SA = SA X (Total number of premiums paid / Total
number of premiums payable)

• Bonuses already vested to the policy will be added to this
amount

• The policy will however not be eligible for any future
bonuses

• The rider benefits will cease to be payable in case of a paid-
up policy

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Policy revival

• A lapsed policy may be revived subject to the
following:

• Allowed within 2 years from the due date of the first unpaid
premium and before the end of the PPT

• Revival will be based on the revival norms then applicable
• The Policyholder furnishes, at his own expense, satisfactory

evidence of health of the Life Assured, as required by the
Company
• The arrears of premiums together with interest, at such rate
as the Company may declare from time to time, for late
payment of premiums are paid

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Analytics used in
Insurance

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Predictive Modelling and AI – An Introduction

• Predictive modelling is the practice of extracting insights from the existing data set
with the help of data mining, statistical modelling and artificial intelligence (AI) /
machine learning techniques and using it to predict the future events.

• A major focus of artificial intelligence is to automatically learn to recognize complex
patterns and make intelligent decisions based on data.

• Artificial intelligence can be looked at as a set of tools to create our predictive models
• Predictive modelling and artificial intelligence cannot guarantee an outcome but it can

help minimize risk and reduce uncertainty.

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Common
Predictive
modelling methods

www.actuariesindia.org

Predictive modelling methods - Examples

➢ Classification – A bank might use to predict which customer (loan applicant) are risky
or which are safe.

➢ Regression - This can be used to predict the future sales of a Company based on the
current economic conditions. It also helps to compare the effects of variables measured
on different scales , such as the effect of price changes and the number of promotional
activities.

➢ Clustering – It is commonly used by big companies for market / customer
segmentation of different products and using separate strategies for different segments
accordingly

➢ Association rule mining – Association rules are used to assist in cross-selling based

on input data such as customer buying bread and mill frequently together, or soda and

chips frequently together and so on 49

Applications • Analytics and Predictive Modeling – most
of Predictive important business and technology development
Modeling in area in insurance in the last decade

Insurance • Main areas of application are:
• Actuarial Investigations
• Sales and Marketing or Customer Experience
• Claims Fraud Detection
• Underwriting
• Business planning