June 2019

General Insurance Research Update

By Scott Lennox

The General Insurance Research Committee continues to meet monthly to identify relevant research topics and potential partnering organizations with the goal of furthering the SOA’s activities in general insurance. As well, the committee is dedicated to providing members with results that will help them in their day-to-day activities. The committee welcomes ideas for consideration and is seeking additional members. If you are interested in either submitting ideas or becoming a member, please contact Scott Lennox, SOA staff fellow at slennox@soa.org.

The SOA has the following research projects relating to general insurance currently in progress:

Predictive Analytics an Application to Agriculture—The overall aim of the proposed research is to develop new predictive models in the context of agricultural insurance. To accomplish the overall objective, this research will include developing an innovative time-series extrapolating model that can provide long-term crop yield forecasting. A main contribution of this research is that the new proposed forecasting model can decompose the effects of weather and technology on crop yield. Therefore, the forecasting model will help to explain how much of the observed yield trend is due to advances in technology, and how much of the trend may be due to weather conditions.

  • Quantification of Cyber Risk for Actuaries—This research aims to develop an economics-based risk analysis framework to help actuaries quantify cyber security risk into monetary value. The innovations of the proposed research are:
      • Development of a risk analysis method emphasizing the interdependencies and ripple effects of cyber failure in one system on other dependent systems through the synergy of their respective functionalities
      • Inclusion of human factor as one vulnerability
      • Development of a method to calculate monetary value of cybersecurity risk
      • Validation of developed framework using agent-based modelling and simulation techniques

    The deliverables of the project will be a report of the developed method. The researchers will also host a webinar to disseminate the research findings to a broad audience, as well as scholarly publications in peer reviewed journals and conferences.

  • Loss Modeling for Rollover in Autonomous Vehicles—This project will investigate rollover risk of a specific autonomous vehicle that is available in the researcher’s lab. This autonomous vehicle is a pure electric vehicle driven by battery and electric motors. Enabled by various autonomous sensing systems on the vehicle, such as GPS, camera and radar, the autonomous vehicle was successfully tested for its self-driving capability on the Arizona State University campus and is ready for the research purposes of this proposal. This will lead to a general methodology on assessing rollover risk in the context of autonomous vehicles, as well as to the creation of a loss distribution due to car damage in the rollover setting.

The SOA General Insurance Research Committee is currently seeking individuals to join a volunteer project oversight group (POG) to help guide and oversee the following project:

  • Projecting Dependent Loss Ratio Under Shifting Parameters—This research will focus on stable and accurate loss ratio projections for reserving and ratemaking. Ultimately, the goal of any company is to minimize the discrepancy between projected and realized loss ratios. This research proposes a least squares approach to minimize this discrepancy.

The POG seeks four to seven volunteers who may be FSAs, ASAs, or non-members with backgrounds in the topic. Volunteers are expected to participate in periodic, hour-long conference calls (a total of five to 10 calls expected over the course of a project) to review material and provide guidance. Research projects provide a way for volunteers to network, build upon their experience in the field, and help support the SOA’s research efforts. If you have questions about the research projects listed above, contact Scott Lennox, SOA staff fellow at slennox@soa.org. If you would like to volunteer, please review the current open volunteer positions on the Volunteer Opportunities Database.

Scott Lennox, FSA, FCIA, FCAS, is a staff fellow for the Society of Actuaries. He can be contacted at slennox@soa.org.