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COPE Update The Pricing Journey Supporting 2014 Strategy through the Transformation Program Kellee Irwin- VP Underwriting October 22, 2010 1.

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Presentation on theme: "COPE Update The Pricing Journey Supporting 2014 Strategy through the Transformation Program Kellee Irwin- VP Underwriting October 22, 2010 1."— Presentation transcript:

1 COPE Update The Pricing Journey Supporting 2014 Strategy through the Transformation Program Kellee Irwin- VP Underwriting October 22,

2 1.Introduction 2.Objectives of Today 3.ICBCs Pricing Strategy- Why are we changing? 4.Pricing – What are we doing? a)New Pricing Model for replacement of CRS b)Improvements to Fleet c)Enablers for New Pricing Models 5.Insurance Purchase Experience 2 Todays Agenda

3 In todays session we hope to give you a better understanding of the following: –ICBCs current insurance model –Why we need to change it –What the future model might look like –What our customers and employees have to say about where we are going –How we want to enhance the Insurance Purchase Experience 3 Todays Meeting Objectives

4 1.Recap 2.Objectives of Today 3.ICBCs Pricing Strategy- Why are we changing? 4.Pricing – What are we doing? a)New Pricing Model for replacement of CRS b)Improvements to Fleet c)Enablers for New Pricing Models 5.Insurance Purchase Experience 4 Agenda

5 2014 Strategy 5 Improving pricing and purchase of insurance moment of truth will help improve customer perception.

6 Why Change: Customers Current Perception of Price/Value

7 7 CRS Discount Distribution CRS does not adequately differentiate and recognize safe driving records Confidential Strategic Policy Advice Why Change: Need for a New Model

8 Case for Change Discussion 8 Discussion Exercise – Why Replace CRS

9 1.Recap 2.Objectives of Today 3.ICBCs Pricing Strategy- Why are we changing? 4.Pricing – What are we doing? a)New Pricing Model for replacement of CRS b)Improvements to Fleet c)Enablers for New Pricing Models 5.Insurance Purchase Experience 9 Agenda

10 10 Insurance Purchase Experience Pricing ICBCs Pricing Portfolio

11 11 Overall: # of Policies – 3.5 million Premiums earned - $3.6 billion Transactions Processed – 6.5 million Personal: # of polices – 2.8 million Premiums earned - $3.1 billion Commercial (CRS & Fleet): # of polices – 650,000 Premiums earned -$528 million ICBCs 2008 Insurance Book of Business

12 Personal Customer (CRS) Non-Fleet (CRS) Fleet 12 Pricing: ICBCs Book of Business Commercial

13 13 Goals for 2014 Implement pricing model acceptable to customers Improved customer price value perception Rates become more reflective of driver (vs. vehicle) risk to increase fairness of rates Priorities for 2014 Personal Pricing: build and implement new pricing model Commercial Pricing: implement foundational changes for improved pricing Key Initiatives Personal Pricing: DRM (Driving Record Model) Evolution of DRP (Driver Risk Premium) Commercial Pricing: Fleet ICBCs Approach to Pricing Changes

14 14 Easy to understand Easy to administer Rate stability and predictability Respect our historical mandate - universality and accessibility Respect social and legislative/regulatory framework Customer feels model acknowledges their past Guiding Principles

15 1.Recap 2.Objectives of Today 3.ICBCs Pricing Strategy- Why are we changing? 4.Pricing – What are we doing? a)New Pricing Model for replacement of CRS b)Improvements to Fleet c)Enablers for New Pricing Models 5.Insurance Purchase Experience 15 Agenda

16 Personal Customer (CRS) Non-Fleet Commercial (CRS) Fleet 16 New Pricing Model – CRS Replacement

17 17 What it is: New driver based insurance rating model to replace Claims Rated Scale (CRS) Incorporates key elements that customers can control Addresses both insurance premium on vehicle and drivers licence Driving Record Model (DRM)

18 Rating Variable Exercise 18 Table Exercise – CRS Replacement

19 19 What it is: Incorporates key elements that customers can control: 1. At-fault crashes Driving Record Model (DRM)

20 20 What it is: Incorporates key elements that customers can control: 2. Driver Experience Driving Record Model (DRM)

21 21 What it is: Incorporates key elements that customers can control: 3. Driving Convictions Driving Record Model (DRM)

22 22 What it is: Post 2014 Evolutionary Approach – continue to evolve after implementation Fine tune variables Additional variables will be considered Driving Record Model (DRM)

23 23 Key Differences between CRS & DRM Current/CRSDRM Rating FocusVehicles historyDrivers history Rating Variables At-fault crashes and Driving Experience At-fault crashes Driving Experience Driving Convictions Who is included? Owner Primary Driver Owner Primary Driver

24 Comprehensive consultation strategy Customer, employee, & broker input critical Learning from the past Early consultation results – we are on the right track 24 Key to DRM Success - Consultation

25 CustomerEmployee April Survey JuneFocus GroupsFocus Group JulySurvey AugustFocus Group DRM Consultation Completed to-date

26 Customers… are used to CRS but have many misconceptions view insurance as rewards and penalties not an assessment of future risk have no common definition of a high and low risk driver support the idea of shifting some of the insurance impact of unlisted operator crashes away from the vehicle owner toward the driver who had the crash –but the degree of the shift depends on whether the driver has a vehicle of their own Customer Focus Group (June) Key Findings

27 Insights from the focus groups were used to develop a survey Methodology –Online survey –Sample size = 808 –Representative of BC population Customer Survey Approach (July)

28 More customers believe ICBC sets rates to recover the cost of past claims than basing them on risk. Customer beliefs about how ICBC determines premiums

29 Customers believe there is a connection between convictions and the risk of having a crash. Convictions and Risk

30 7 out of 10 customers believe convictions could impact their vehicle insurance today. Convictions and Premium

31 Customers were first shown a list of more than 30 traffic convictions that are in DRP/DPP. They were then asked about the fairness of considering additional traffic violations (also shown) for the purpose of a conviction-free discount. 75% of customers believe its fair that a driver must be free of all the traffic convictions listed in order to receive a conviction-free discount Conviction Free Discount – Convictions List

32 Most customers said it would be fair if Joe pays more for the insurance on his own vehicle and Marys insurance is unaffected. Customers were told to imagine a scenario in which Joe (a licensed driver with a vehicle of his own) has an at-fault crash in his wife Marys vehicle.. Unlisted Operator Crashes

33 In this scenario, most customers support a modest charge on Marys vehicle insurance. Customers were told to imagine the same scenario but this time Joe did not have a vehicle of his own. Unlisted Operator Crashes Continued

34 Weighting of Crashes 8 out of 10 customers believe at-fault crashes should have different effect on their insurancethe older the crash, the less impact it should have on their insurance Rating Based on RO and PO 7 out of 10 customers think it would be fair for ICBC to consider the driving history of both the RO and PO in determining their insurance cost Customer Survey – Other Key Findings

35 Employee Panel: Total of eleven participants from both bargaining unit and non-bargaining unit staff Representing Claims, IT, Broker Enquiry Unit, Customer Contact, Training, Driver Licensing, Customer Relations and Collections Participants were asked to provide feedback from both an employee perspective and from the perspective of the customers they interact with Employee Focus Group

36 Employees largely receptive to the case for change and the general direction but cautioned that… –Change should not be too dramatic –Make DRM simpler than CRS to explain –Ensure tools developed to explain DRM available to customer-facing employees across the company – particularly Claims –Make link for customers between behaviour and premium –Need to look at rewarding good driving behaviour Employee Focus Group (June) – Case for Change

37 All supported the movement towards driver-based –Current vehicle based system is very confusing –Cautioned about the impact on multiple vehicle owners and how they are transitioned Employees views are similar to customers regarding treatment of unlisted operator crashes: –The driver should bear all responsibility for an at-fault crash if he has a vehicle of his own Employee Focus Group (August) – DRM Components

38 Employees views are similar to customers regarding treatment of unlisted operator crashes (cont.): –If the driver doesnt have his own vehicle, the RO should pay a modest one-time insurance surcharge on vehicle involved in crash, while the drivers insurance will be impacted the next time he insures a vehicle. –Concerned about consistency re: impacts to RO in different scenarios- getting too complicated Other panel comments: –Needs to be easily explainable, less complicated than CRS –Balance between consistency, accountability and perceived fairness –Transition gradually Employee Focus Group (August) – DRM Components

39 39 Broker/customer/employee consultation – Finalize high-level DRM model and pricing changes – 2011 High-level internal DRM communication – ongoing BCUC review and approval of DRM – 2011 – 2012 Broker and employee training happening 2013/2014 DRM Implementation – 2014 DRM Next Steps

40 1.Recap 2.Objectives of Today 3.ICBCs Pricing Strategy- Why are we changing? 4.Pricing – What are we doing? a)New Pricing Model for replacement of CRS b)Improvements to Fleet c)Enablers for New Pricing Models 5.Insurance Purchase Experience 40 Agenda

41 Personal Customer (CRS) Non-Fleet (CRS) Fleet 41 Improvements to Fleet Commercial

42 42 Need to increase fairness in our pricing for fleets Make rates more reflective of the risk of each fleet Fleetplan changes being implemented Jan 2011 Changes ongoing/evolve after implementation Improvements to Fleet

43 1.Recap 2.Objectives of Today 3.ICBCs Pricing Strategy- Why are we changing? 4.Pricing – What are we doing? a)New Pricing Model for replacement of CRS b)Improvements to Fleet c)Enablers for New Pricing Models 5.Insurance Purchase Experience 43 Agenda

44 Why: Current system is 30+ years old Updates and changes cumbersome Needed for DRM Flexible technology More responsive to customer needs What it is: Calculates customer premiums Uses rates, rating variables and rules and the customers risk profile 44 Enablers: New Rating & Underwriting Engine (NRUE)

45 1.Recap 2.Objectives of Today 3.ICBCs Pricing Strategy- Why are we changing? 4.Pricing – What are we doing? a)New Pricing Model for replacement of CRS b)Improvements to Fleet c)Enablers for New Pricing Models 5.Insurance Purchase Experience 45 Agenda

46 46 Insurance Purchase Experience Pricing ICBCs Pricing Portfolio

47 47 Delivering on Customer Expectations: Move from transaction focused to customer focused experience Help brokers deliver customized products and experience to customers Allow more timely changes/new products Address legacy systems Supporting delivery of new pricing model Making it Happen at the Insurance Purchase

48 48 Short Term Changes- Rate Quote Longer Terms Changes - Insurance Sales Administration Systems Insurance Purchase Experience Projects

49 49 Why: Current system end of life Needed to support implementation of DRM 2 nd most used system next to ADC What it is: Important tool brokers use to provide customers with quotes Tool for manual transactions when point-of- sale system is unavailable Launch in November 2010 Streamline Online Rate Quote

50 50 Why: Customer Perception –To improve the customer experience and maintain our competitiveness –Offer choice, convenience & service while reinforcing value Employee Experience –Employees and brokers need better work tools to improve their experience and the customers experience Financial Stability –Other insurers improving POS –Need to be able to bring new products & changes to customers faster Insurance Sales & Administration Systems

51 51 What it is: ISAS project will modernize the current sales and admin systems –Address aging ADC system –A new Point of Sale (POS) –A new Policy Admin System (PAS) –Enhancements to existing systems ISAS is an essential cornerstone of TP tied to ICBCs revenue stream Insurance Sales & Administration Systems

52 52 Project scoping phase – Future phases will be determined as part of project scoping phase Consultation with brokers & impacted stakeholders starting in 2011 Next Steps - Insurance Sales & Administration Systems

53 53 Questions?


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