Automated Premium Calculation Validation
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Solution Overview
Problem
Manual validation of insurance premium calculations by actuaries becomes unmanageable with large datasets, leading to potential errors that can result in significant financial discrepancies.
Innovation Solution
A computing platform and method that automatically validates premium calculations by comparing outputs from a third-party rating system with an internal rate calculator, flagging differences for correction and ensuring accurate data entry.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Measurement precision
If manual validation of premium calculations is performed by actuaries, then accuracy of pricing can be maintained, but the process becomes unmanageable with large datasets exceeding 1 million insurance profiles
Solution Approach 1:
The patent replaces the manual mechanical validation process performed by actuaries with an automated computer-based system. The system retrieves premium calculations from a third-party rating system, independently recalculates premiums using stored rate factors and insurance profiles, and automatically compares results to identify discrepancies. This substitution enables handling of large datasets exceeding 1 million profiles while maintaining validation accuracy.
2Reliability
If manual validation processes are used, then error detection can occur, but the time required to correct propagated errors increases significantly
Solution Approach 1:
The system performs preliminary validation by automatically comparing third-party premium calculations with independently calculated premiums before finalizing pricing decisions. By retrieving calculations, recalculating using stored rate factors, and identifying discrepancies in advance, the system detects errors before they propagate through the pricing process, enabling timely correction without significant delays.
3Adaptability or versatility
If third-party rating systems are used for premium calculations, then specialized pricing expertise can be leveraged, but data entry errors and calculation discrepancies may occur
Solution Approach 1:
The system implements a feedback mechanism by automatically comparing premium calculations from the third-party rating system with independent recalculations performed using stored rate factors. When discrepancies are detected, the system identifies and flags the specific differences, providing feedback that enables correction of data entry errors or calculation issues while maintaining the ability to leverage specialized third-party pricing expertise.
Data Source
AI summary
Computing platforms, methods, and storage media for validating a price calculation, such as a premium calculation, are disclosed. Exemplary implementations may: obtain, from a rating system configured for calculating premiums, a rating system premium calculation based on a plurality of profiles and on a stored set of rate factors; independently calculate a local system premium calculation based on the plurality of profiles and based on a current set of rate factors associated with calculating premiums; and automatically validate the rating system premium calculation based on comparing the rating system premium calculation with the local system premium calculation.