In the fast-paced world of the insurance industry, business decisions and rules constantly evolve. Insurance companies must adapt to changing market conditions, customer demands, and regulatory requirements. But how can they understand the impact of those changes on existing or new policyholders?
Understanding the impact of changes to business rules is crucial. Identifying the impact of a minor change to a complex decision model with many interrelated parts is a challenging task. As each part evolves, tracking each change is important, but understanding the overall impact of the changes on policyholders is a different story.
Change history is the integral part of change management process that allows the team to look at all individual changes across rules, decisions and other artifacts.
To illustrate the process of evaluating the impact of a change to business rules, let's consider a sample model of a car insurance premium calculation. Calculating the basic premium, evaluating eligibility, identifying customer segments, and many other interrelated decisions are all integral parts of this model.
Assume this company wants to answer the following questions in order to analyze the impact of a logic change or input change:
- How are discounts allocated among states?
- How are discounts distributed in accident-prone areas?
- Which gender gets higher discounts?
Understanding the complex dynamics between various factors influencing the discount component is critical for ensuring precise premium calculation. To refine the overall premium calculation strategy, the company must carefully track the changes and evaluate the impact on each part of the internal decision nodes.
Determine the discount component
Let's explore how this model determines the discount first, which is just one part of calculating the total auto premium. Determining the discount involves evaluating driver eligibility, doing various calculations based on the driver and the car to calculate the auto premium, and calculating discounts based on the different business rules.
When calculating the auto premium for car insurance, customers may or may not be eligible for a certain amount of auto premium discount. According to the scenario, two factors are involved when determining the discount component:
- Car condition discount percentage – This discount percentage will be added up based on the several features of the car and applied as a total discount.
- Market segment discount – This discount will be determined according to the market segment the customer belongs to.
Let's discuss how Client Market Segmentation works.
Determine client market segmentation
According to this example, there are two types of client segments.
- Preferred Client – A “Preferred Client” has a portfolio that includes at least three different insurance products.
- Elite Client – An “Elite Client” falls within UServ’s top 1% of clients based on revenue.
The above decision graph illustrates how the model is designed to determine the discount component among clients. The next stage is to analyze the results of these processes to understand how to improve the business model and check the impact of the changes.
Analyzing the impact of different elements on auto premium calculation
The best way to analyze the impacts of decision changes is to use an automated tool for data exploration and analysis. FlexRule’s Booklet is a powerful tool for understanding how business decision changes will impact the organization's objectives. The tool can analyze the behavior of any logic and predict its impact on other internal decisions and outcomes.
Users are enabled to build and manage data rules and create interactive charts. The booklet can collect metrics in a decision node and display them along with input and output parameters.
Simply import the data into the booklet and create any scenario to generate filters and charts for in-depth analysis.
Let's look at the discount scenario in the image below. Only the eligible clients are filtered from sample clients, generating different graphs.
- The pie chart shows how discounts are distributed between genders.
- The bar chart compares the discount percentage through different states.
- The bubble chart compares the discount, driver’s age, and the number of accidents as the bubble's radius.
Understanding The Rules Change Behaviour
When some criteria, rules or decision changes are required, the insurers not only need to analyze the outcomes of individual decisions but also, have to have a clear understanding of how these change the business rules behaviour in the existing (or new) portfolio. The impact of change analysis allows the loading of sample data into the new and old decision models, then it creates the report on rule execution with a single click.
Running New and Existing portfolio against the changes to see how business rules execution are impacted.
Everything insurers need for the impact analysis is provided right from the authoring environment using Booklet. SEMs and non-technical people can feed data to a decision model and then analyse the impact of change without the need to create custom queries, and reports or use other tooling via import/export. Impact analysis (i.e., outcomes of decisions, changes in KPIs, and rule execution) is fully integrated into FlexRule X by the power of Booklet.