CAS Predictive Modeling Seminar

Experian is a registered trademark of Experian Information Solutions, Inc.©Experian Information Solutions, Inc. 2001 Confidential and proprietary - not for dissemination

CAS Predictive Modeling CAS Predictive Modeling SeminarSeminar

Predictive Modeling for a Commercial Insurance Company with Little or No

Data

Scott Bronstein October 5, 2004

©Experian Information Solutions, Inc. 2001 Confidential and proprietary - not for dissemination

Discussion pointsDiscussion points

Data available for predictive modelingData available for predictive modeling Models in useModels in use Sample resultsSample results SummarySummary


Modeling guidelines with minimal dataModeling guidelines with minimal data Know your target populationKnow your target population Tap into business data - even minimal amount Tap into business data - even minimal amount

of business performance data can be predictiveof business performance data can be predictive Use consumer data as appropriateUse consumer data as appropriate Segment the population Segment the population Validate at logical intervals - can recalibrate if Validate at logical intervals - can recalibrate if

necessarynecessary


Publicly held<1%

Privately held 7%Privately held 7%

PartnershipsPartnerships15%15%

Sole proprietorshipsSole proprietorships77%77%

190 million consumers

Source: Statistical Abstract of the United Source: Statistical Abstract of the United StatesStates

Twenty-two million businesses

Composition of U.S. businessesComposition of U.S. businesses


Experian Business Information Experian Business Information SolutionsSolutions

Integrated Information SolutionsIntegrated Information Solutions

National Business National Business DatabaseDatabase

NationalBusiness Credit

Database

Business Public Business Public Record DatabaseRecord Database

National Consumer National Consumer Credit DatabaseCredit Database

No other company houses these assets under a single No other company houses these assets under a single roofroof


FirmographicsExperianExperianBusiness Credit Business Credit

DatabaseDatabase

Standard & PoorsStandard & Poors

Public Public recordrecord

Banking, Banking, insurance,insurance,

leasingleasing

Trade Trade paymentpayment

Marketing databaseMarketing database

CollectionsCollections

Credit Database SourcesCredit Database Sources


National Yellow Pages

NationalNationalBusiness DatabaseBusiness Database

Credit Database

Data VendorsData Vendors

Televerified Televerified DataData

Marketing DatabaseMarketing Database

DBA/FBNDBA/FBN(new (new

business)business)

Business White Business White PagesPages


Scores Offer Solutions Scores Offer Solutions Across Customer LifecycleAcross Customer Lifecycle

Score portfolio to: Score portfolio to: Help process renewalHelp process renewal Identify cross-sell and Identify cross-sell and

up-sell opportunitiesup-sell opportunities Adjust credit limits Adjust credit limits

MaximizingMaximizing Score portfolio to:Score portfolio to: Monitor application Monitor application

policiespolicies Track ongoing Track ongoing

customer riskcustomer risk Prioritize / expedite Prioritize / expedite

collectionscollections Determine gross Determine gross

measures of portfolio measures of portfolio risk risk

ManagingManaging

Score portfolio for Score portfolio for targeted pre-targeted pre-qualified & cross-sell qualified & cross-sell effortsefforts

Select pre-qualified Select pre-qualified names from BIS names from BIS marketing listmarketing list

TargetingTargeting Process new applications Process new applications

using internet, online using internet, online software or CPU access.software or CPU access.

Bulk portfolio purchases Bulk portfolio purchases

AcquiringAcquiring


Intelliscore overviewIntelliscore overview Used primarily in small business lending, commercial Used primarily in small business lending, commercial

card, leasing, telecommunications, and business card, leasing, telecommunications, and business servicesservices

Commercial IntelliscoreCommercial Intelliscore Utilizes Utilizes commercial credit, business demographics, credit, business demographics,

public record and legal informationpublic record and legal information Small Business IntelliscoreSmall Business Intelliscore

Utilizes Utilizes commercial and consumer credit, business credit, business demographics, public record and demographics, public record and legal informationlegal information


Intelliscore models are Intelliscore models are segmented scoring systemssegmented scoring systems

Businesses within a modeling Businesses within a modeling sample are clustered or sample are clustered or segmented by common segmented by common characteristics such ascharacteristics such as

Size of businessSize of business Credit historyCredit history Data type availabilityData type availability

When predictors behave When predictors behave differently between clusters, the differently between clusters, the file should be segmented so the file should be segmented so the clusters can be modeled clusters can be modeled independently to capture subtle independently to capture subtle nuances in payment behaviornuances in payment behavior


Model Model Segment 1Segment 1

scorescore

Model Model Segment 2Segment 2

scorescoreModel Model

Segment 3Segment 3scorescore

TransformationTransformation

Uniform 0 - 100 scoreUniform 0 - 100 score

Model segment integration Model segment integration Scoring system integrates model segments into one Scoring system integrates model segments into one uniform scoreuniform score

Each Intelliscore model solution consists of several Each Intelliscore model solution consists of several modeled segments each with its own set of variables modeled segments each with its own set of variables and raw scoreand raw score


Commercial credit and business demographic information for up to fifteen elements

Credit score and percentile

Action

Score factors

Commercial Intelliscore ReportCommercial Intelliscore ReportKey featuresKey features


Commercial IntelliscoreCommercial Intelliscore18% to 60% lift in predictiveness18% to 60% lift in predictiveness

60%

21%

34%

23%

19% 18% 19%

27%24%

0

5

10

15

20

25

30

35

40

45

50

KS

0%

10%

20%

30%

40%

50%

60%

70%

% L

ift

New CI CI %Lift

New CI 25.03 27.73 21.42 20.37 19.28 22.12 22.45 24.27 20.19 45.20

CI 20.64 20.72 17.48 12.77 16.24 18.69 18.84 19.14 16.31

%Lift 21% 34% 23% 60% 19% 18% 19% 27% 24%

Client A Client B Client C Client D Client E Client F Client G Client H Client I Development


Small Business IntelliscoreSmall Business Intelliscore12% to 35% lift in predictiveness12% to 35% lift in predictiveness

12%

19%

31%

35%

0

5

10

15

20

25

30

35

40

45

50

KS

0%

5%

10%

15%

20%

25%

30%

35%

40%

% L

ift

New SBI SBI % Lift

New SBI 32.20 34.85 26.31 35.45 47.28

SBI 28.68 29.38 20.14 26.27

% Lift 12% 19% 31% 35%

Client A Client B Client C Client D Development


SummarySummary Wide array of business data is availableWide array of business data is available Familiarity with how to use the data is Familiarity with how to use the data is

criticalcritical Small business is broadly defined and data Small business is broadly defined and data

availability will varyavailability will vary Segment the populationSegment the population Commercial risk scores are predictive Commercial risk scores are predictive

across several industries - and probably across several industries - and probably othersothers

CAS Predictive Modeling Seminar

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