Are We Setting the Right Price ?
As an actuarial consulting firm, we spend a lot of time deriving the specific cost for F&I products, both from an overall perspective and down to the granular level. For example, we develop models which inform you that the cost of a wrap service contract for a Hyundai Elantra with 30,000 miles and 2.5 years of service will be $45 less than a Hyundai Elantra with 45,000 miles and 3.5 years of service. (Note, we just made up these numbers).
So we are very precise with our estimates of what drives service contract claims. However, we don’t seem to be very precise when setting the final price to the consumer
Posted on 7. May, 2012 by Emily in Articles, Articles by John Kerper, Articles by Lee Bowron
GAP – Where Do We Go From Here ?
While publicly available data is not available for GAP writers, it is clear of that 2011 will go down as a profitable year for GAP Insurance.
This is due to two factors: the lower leverage permitted by the credit markets and the high value of used cars.
Posted on 31. Jan, 2012 by Emily in Articles, Articles by John Kerper, Articles by Lee Bowron
Carrier And Administration Relations – Best Practices
Hyundai recently announced an innovative program: a trade-in value program which guarantees the value of the customer’s car. Here is how the program basically works:
Posted on 16, Nov 2011 by Emily in Articles, Articles by John Kerper, Articles by Lee Bowron
Month-to-Month Vehicle Service Contracts
Vehicle service contracts have traditionally been sold as a single pay product purchased at the time of vehicle purchase. While the typical retail charge for the vehicle service contract (VSC) can be in the thousands of dollars, the availability of the vehicle finance contract provides a ready source of funds to pay the full cost.
However, there are many excellent marketing opportunities for a service contract where a finance contract is not available to pay this cost. These include…
Posted on 26, Oct 2011 by Emily in Articles, Articles by John Kerper, Articles by Lee Bowron
Hyundai’s New Trade In Value Guarantee
Posted on 09. Mar, 2011 by Emily in Articles, Articles by John Kerper, Articles by Lee Bowron
Hyundai recently announced an innovative program: a trade-in value program which guarantees the value of the customer’s car. Here is how the program basically works:
GAP Insurance- Techniques and Challenges
Posted on 09. Mar, 2011 by Emily in Articles, Articles by John Kerper, Articles by Lee Bowron
GAP Insurance – Techniques and Challenges GAP (Guaranteed Asset Protection) insurance is an insurance product that insures the difference (if any) between the loan balance and the actual value of the underlying asset. Typically, this insurance is sold in conjunction with a traditional insurance product and guarantees that an insurable event will be sufficient to satisfy any lein upon the asset. While this type of insurance is used to cover a variety of exposures, the largest asset class is private passenger vehicles.
Considerations When Designing New Products
Posted on 08. Mar, 2011 by Emily in Articles, Articles by John Kerper, Articles by Lee Bowron
Designing new products is exciting but challenging. How do you estimate the losses or earn the premium? Have you considered how you are going to monitor the experience? Will a change in the economy impact the claims rates?
GAP: Is There Hidden Equity
Posted on 08. Nov, 2010 by Emily in Articles, Articles by John Kerper, Articles by Lee Bowron
GAP typically earns on a Rule-of-78s basis. This article explains why you may be earning your premium too slow to accurately monitor your book.
GAP: Back From The Brink
Posted on 07. Jul, 2010 by Lee in Articles, Articles by John Kerper, Articles by Lee Bowron
A discussion of the volatile results of GAP that were experienced during the recession which began in 2007.
Beyond The Failure Rate: How Psychology Impacts Service Contract Claims
Posted on 07. Apr, 2010 by webmaster in Articles, Articles by John Kerper, Articles by Lee Bowron
Claiming behavior is an often overlooked but important concept when evaluating a product.
Changing Warranty Terms: Impact On Service Contracts
Posted on 17. Feb, 2010 by webmaster in Articles, Articles by John Kerper, Articles by Lee Bowron
Manufacturer’s warranties have increased on many models during the last several years. What is the impact on service contracts?
An Exposure Based Approach To Automobile Warranty Ratemaking And Reserving
Posted on 01. Nov, 2007 by Emily in Articles, Articles by John Kerper, Articles by Lee Bowron
Existing actuarial techniques for automobile warranty ratemaking and reserving rely heavily on emerging experience (loss development) for the pricing and unearned premium reserving of these products. Since terms for automobile warranties can extend up to 10 years, such data is typically not available or not credible to the degree that the actuary can take great reliance on it. In addition, changing coverage terms in the auto warranty products can often make past development even less meaningful.
Zipf’s Law
Posted on 01. Jan, 2004 by webmaster in Articles, Articles by Lee Bowron
“Zipf’s Law,” appears in the January 2004 issue of Contingencies. Zipf’s Law is an interesting power-law phenomenon that has interesting applications to many aspects of life, including market share.
Staying In The Race
Posted on 01. Dec, 2001 by webmaster in Articles, Articles by Lee Bowron
“Staying in the Race,” – appears in Best’s Review, December 2001-For Property Casualty insurance, “Business Retention” has always taken a back seat to its sexy cousin, “New Business Production.” However, companies and agencies are increasingly analyzing retention and focusing on improving it. Even small improvements in retention can make large improvements to profitability levels.
Managing Non-Life Insured Products Sold Through Auto Dealers
Posted on 18. Jun, 2001 by webmaster in Articles, Articles by John Kerper
Managing Non-Life Insured Products Sold Through Auto Dealers- Excerpt: Auto Dealers offer several insurance and insured products through their finance and insurance (F&I) departments other than credit life and credit A&H. Vehicle service contracts, gap and financing are three other products offered by the F&I department that are often insured by property & casualty insurers. We will examine each of these products separately in a three-part series.
Part I: Vehicle Service Contract
Part II: GAP
Part III: Finance Reserve
Ratemaking For Maximum Profitability
Posted on 01. Jan, 2001 by webmaster in Articles, Articles by Lee Bowron
Ratemaking For Maximum Profitability – appears in the 2001 Winter Forum Ratemaking Discussion Papers-The goal of ratemaking methodologies is to estimate the future expected costs for a book of business. However, if one looks at the rate activity in a market, it is apparent that company actions do not always follow the indications. Surprisingly, such decisions often lead to successful results. It seems that there must be something going on that is invisible to the naked eye? Do indications really mean so little? Or are there other factors, buried data that is difficult to quantify?