Introduction

Arius Enterprise® is a complete solution for analyzing casualty reserves and estimating lost costs, and has become an invaluable tool for the actuarial reserving team at a major U.S. insurance carrier. Implementing Arius helped the company transform its reserving work into a more efficient, accurate, and organized process. This case study outlines the Arius Enterprise capabilities that have had the greatest impact on this client’s processes, as well as Milliman’s continued dedication to further enhancing the Arius solution to meet its growing reserving needs.

Arius has become essential to the success of this insurer’s reserving processes and predictive analytics capabilities.

How Milliman helped this major insurer streamline its actuarial reserving processes

Improved data management

Arius Enterprise has been essential in optimizing the insurer’s reserving work, especially when it comes to data upload and download processes. Specifically, the processes for getting data into Arius for analysis as well as extracting the key management information from Arius are both more efficient than this client’s previous systems, providing insights previously unavailable. This has become a crucial time-saving benefit during demanding quarter-end cycles. In addition, the automatic cloud backup available through Microsoft’s Azure platform saves time securing the company’s databases, reducing reliance on IT staff. Altogether, the improvements in data processing efficiency save this client a substantial number of hours each quarter.

Assured accuracy

Previously, the actuaries managed approximately 50 interconnected Excel spreadsheets to estimate reserves each quarter. If these spreadsheets weren’t refreshed in the exact proper order, calculations could be wrong. The reserving team could spend as much time making sure the spreadsheets were properly updated at the beginning of each period as they did analyzing results. In contrast, unlike spreadsheets, which can be altered, Arius is built on a system of tested, accurate calculations that can’t be changed. Because of this, the client is confident that, once the data is loaded, the team’s work will remain free from link, formula, and macro errors, without the need for retesting calculations or careful review of internal links or formulas.

Rigorous control and security

In addition to inaccurate results, the reserving team often lacked documentation of the edits made to their spreadsheets, frustrating their internal auditors. With Arius, they maintain a record of who makes changes to the data and the various selections, together with time and date stamps. This helps validate that only the appropriate people are involved throughout the reserving process.

Template methods and diagnostics

Arius includes a wide selection of prebuilt diagnostics, reserving methods, and management reports, which are thoroughly tested and readily available to use, while also providing the option to easily create additional methods, inputs, and arrays. This has improved consistency among all the users, even when various analysts might choose to use different methods. In addition, this not only helps simplify training for new staff and fosters comfort for new analysts, but also significantly streamlines their peer review process.

Flexible data structure

The value of Arius’s strict but flexible approach to data organization became especially important during the COVID-19 pandemic. When the number of miles driven by policyholders decreased at the start of the pandemic, claim frequency dropped significantly. This forced the reserving team to reconsider some things about how they reviewed and estimated auto reserves. For example, they traditionally evaluated their auto liability book on an accident-year basis, but Arius allowed them to easily pivot to an accident-month basis instead.

Receptiveness to new ideas

This insurer found that one of the best things about being an Arius client is the relationship they’ve developed with the Arius software team. The Arius team adds new functionality on an ongoing basis and is quick to respond to requests from their analysts regarding new features and ideas. Three of the biggest requests they have helped with were adding the Berquist-Sherman approach, a new method that reflects the seasonality of accident quarter development factors, and a generalized linear model (GLM) reserving method based on aggregate losses. What’s more, the Arius team also created a unique Power BI dashboard for the reserving team that shows specific metrics at the beginning of each quarter. Analysts now know early in the process which reserving segments may require the most attention.

Conclusion

Arius Enterprise has become an indispensable tool for the reserving team, streamlining their work and providing a growing list of benefits. With features to enhance accuracy, efficiency, and data organization and management, as well the software team’s dedication to continued improvements, Arius has become essential to the success of this insurer’s reserving processes and predictive analytics capabilities.