This is the next installment in a series of conversations with AAIS leadership to get to know them, their background, and the unique work they’re doing within AAIS to further the insurance industry. In this edition, AAIS Views spoke with Michael Payne, Chief Pricing Actuary, about his career, being creative as an actuary, the role data is playing to create better pricing models, and how AAIS is leveraging those models to deliver value to our Members.
Tell us about your background.
Michael Payne: When I was in college, I liked math, but really didn’t know what I wanted to do. Then I heard about Actuarial Science from an alum who came back to campus and gave a presentation about the career path. That’s what sparked my interest. I got an internship at Zurich and that turned into my first job out of school. I started out doing pricing at Zurich, went to SCOR Re to do reinsurance pricing, and went back to Zurich to eventually lead a pricing tools team.
One not-so-traditional role in my career was a stint I did at Sears in their Home Services unit where I was the Director of Underwriting Analysis. Basically, if you bought a refrigerator at Sears, they were going to offer you a protection plan. It was my role to figure out the prices for those protection agreements based on how likely the appliance was going to need to be repaired or even replaced.
Overall, I really like pricing. It’s prospective in nature as you try to determine what might happen in the future.
In the winter of 2018, I joined AAIS where I’ve been able to leverage my pricing experience. My role includes product development and delivering loss costs that are appropriate for the coverage being offered. Not all carriers have a large team of actuaries or loads of data, so our rating plans offer them a faster speed to market for a new line of business, or even insurtechs to get their first policies written.
How does being an actuary foster creativity?
MP: If you’re trying to find insights regarding risk, you can find connections everywhere. Having an outside-of-the-box mentality helps you identify outside data sources that can be helpful to the underwriting process; whether it’s home prices, construction characteristics, satellite imagery, weather data, census data; you don’t have to just rely on the insurance application to inform pricing anymore. With new data sources and technology, there are opportunities to do some creative things that can support the industry.
What are some unique initiatives your team is currently working on?
MP: The Actuarial Services team conducts countrywide loss cost reviews, and we are working on ways to automate components of this process so that we can increase the frequency of these reviews. Our team also develops pricing for new programs that AAIS introduces. Right now, we are developing rating plans for our new programs in auto and CannaBOP, the nation’s first standardized insurance program for commercial cannabis exposures.
What role does data play in your day-to-day?
MP: Data is the center of our universe. We’re always looking for new ways to pull data sources together that help develop insights that we can then share with our Members. openIDL (Open Insurance Data Link) is a data management and information sharing platform that holds great potential for our industry. Initially developed by AAIS, openIDL is now being further advanced by the Linux Foundation as an open-source ecosystem for the entire insurance industry, and we are looking for ways to leverage its blockchain and distributed ledger technologies to further advance our pricing models.
We’ve also introduced our Risk Awareness Service, which takes our own expertise and unique perspective on a variety of perils, combines it with the data we’re consuming from various sources, and shares those insights with our Member carriers, and the industry, to enhance the knowledge of these perils. Take the most recent Hurricane Ida, which had a devastating impact on many communities. We have a whole Hurricane Resource Center that includes Catastrophe Planning tools and a Live Event tracker providing valuable information for underwriters.
From a pricing perspective, what do you see as the value that openIDL can provide?
MP: The ‘data standard’ that is part of openIDL is a big deal. The industry has stat plans that are very archaic and building a new data model with openIDL is going to create much more flexibility. We’ll know data has already been vetted, cleaned, and scrubbed. Then we can focus more easily on getting information from that data, as opposed to determining whether it’s good or not. That will save a lot of time, and promote more timely, accurate pricing. openIDL is a game-changer.
AAIS is unique in providing an All-Access Membership model that enables its Members to participate in openIDL and take advantage of all the products and services AAIS offers.