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Experian® today announced Ascend Commercial Suite™ for financial institutions specializing in commercial lending as well as insurance carriers to drive growth while reducing risk. The suite includes Experian’s Ascend Analytical Sandbox™ configurations and a new Ascend Commercial Benchmarking Dashboard™ that provides access to industry-leading data on small and midsize businesses. “Experian is committed to creating opportunities for businesses to succeed,” said Hiq Lee, president of Experian’s Business Information Services. “During uncertain times, making fast, accurate decisions is critical for lenders so they can continue to extend credit responsibly to the businesses that need it most. Experian’s Ascend Commercial Suite enables clients to access world-class advanced analytics, AI, machine learning, and benchmarking tools so they can make real-time decisions that can ultimately help businesses on the road to recovery ahead.” Experian’s Ascend Analytical Sandbox is an industry-leading cloud-based data and analytics solution that offers flexibility in addressing lenders’ needs and offers instant access to up to 19 years of data. The secure hybrid-cloud environment allows users to combine their own data sets with Experian’s exclusive data assets, including consumer credit, commercial credit, nontraditional, auto, and more. Small and midsize business lenders, as well as insurance carriers, can seamlessly blend commercial and consumer small business data to get a 360-degree view of their overall small business portfolio to more easily identify risks and opportunities. It’s a one-stop-shop for insights, model development, and results measurement. The Ascend Commercial Benchmarking Dashboard delivers a comprehensive visual dashboard view of credit risk data and Small Business Financial Exchange™ (SBFE) Data exclusively for SBFE members. Clients can compare their portfolios against industry performance and analyze new market segments for potential growth and expansion. The insights available through the Ascend Commercial Suite can be viewed and shared through interactive dashboards and customizable reports. Additional use cases include: Portfolio performance and monitoring: Lenders can harness the power of Experian data to better monitor performance and quickly identify areas of strength or concern on visual dashboards without having to run custom reports every month. Model development and validation: Clients can monitor existing models and develop new models in order to improve risk profiles of new accounts and improve existing accounts. Blended analysis: Small business lenders relying on personal guarantees can use both consumer and business data to determine a customer or potential customer’s overall risk. Marketing analytics and acquisition: Lenders’ campaign information and results combined with Experian’s Credit Risk Database help them understand performance and improve marketing and segmentation. Decisioning for risk assessment and segmentation: Lenders and insurance carriers can optimize risk decisioning and segmentation strategies using analytical tools on one platform, which provides quick and efficient access to multiple integrated data sets. Reject inferencing: Lenders can load application data and use SBFE trade-level data to understand how declines performed if customers obtained credit elsewhere. Custom attributes to better analyze portfolios: With SBFE Data, lenders can create their own custom attributes or use Experian’s highly predictive set of attributes. Experian’s Ascend Commercial Suite is built on the Experian Ascend Technology Platform™. Launched in 2017, the Experian Ascend Technology Platform is recognized as one of the most successful launches in Experian’s history. It’s currently being used by the top financial institutions globally including the United Kingdom, South Africa, Brazil and Asia Pacific. Experian’s Ascend Analytical Sandbox was also selected in 2019 as the winner of the “Best Overall Analytics Platform” award by FinTech Breakthrough, an independent organization that recognizes the top companies, technologies and products in the global fintech market. To learn more about Experian’s Ascend Commercial Suite, please visit: https://www.experian.com/business-information/ascend-commercial-suite.

For the past month, the Commercial Data Sciences team in Business Information Services has been taking precautions in response to the Coronavirus Pandemic, working from home. In the span of the past five weeks, we have seen the spread of the disease ramp up, and the death toll climbs. The impact on businesses of all sizes will be immense. In just a few days we built a robust simulator tool that helps businesses assess the impact of COVID-19 as the disease spreads. With this tool, you can: Identify risk in geographies you do business in Based on geography, review the top 5 riskiest industries for that region Apply an impact scenario so you can plan for the best and worst-case scenarios The U.S. business risk dashboard below was developed by Experian Business Information Services to help businesses better understand the impact COVID-19 may have on their commercial operation based on several key factors. This methodology combines business risk, anticipated impact on business industries and real-time COVID-19 case data to help businesses better simulate various impact scenarios down to the state level to help develop enterprise strategies. A paid version of the dashboard goes down to the county and industry level. The risk index is used as a comparative benchmark across states, counties and industries. Industry classification is used to assess the business’s level of exposure due the nature of the business. For example, businesses in the Arts, Entertainment, and Recreation industries will be more heavily impacted than businesses in Public Administration. The risk index represents the credit risk, industry risk, and COVID-19 risk on businesses across the U.S. The impact layer allows users to easily change the severity of the impact related to the combination with the credit risk, industry risk, and COVID-19 risk across regions and industries. This dashboard is meant to be a directional tool for assessing which industries and geographies are most likely to be impacted and how severe the impact will be. The risk index is not designed to be interchangeable with a traditional credit risk score. The risk index is intended to be used independently to gain insights around the potential impact of the current events on future business credit health at summarized levels including region and industry. The risk index has four different assessment scenarios ranging from low to severe. If the expectation is that various industries are affected differently, but the impact overall is minimal, then the minimal scenario should be applied. Select the other scenarios to amplify the impact.  

We recently sat down with Kyle Blanchard, Product Manager with Business Information Services to ask him a few questions about Experian's improved OneSearch technology. What is OneSearch? OneSearch is a lot of things at its core. OneSearch is the ability for a customer to find a business, but the story of OneSearch is much bigger than that. OneSearch is Experian's technological advancement and journey on how we're bringing all of our innovations to drive improvements for our customers. So, our customers can find businesses today, but at Experian we had to ask the question, how can we make this better? And with OneSearch, we're providing the ability for our customers to find businesses faster, and for them to find a more exact match and a more precise business every single time. What should Experian clients expect? Our clients can expect a variety of changes. Those changes won't come in terms of the products or services you're using today, but more about the experience you're having. So whether you're using BusinessIQ, or you're getting files in batch, the only experience difference you're going to feel is you're going to get better match results, more match results, and you're going to get them at a faster speed. So your experience is going to improve. This is going to be free of charge. This is just an internal improvement that we're making for you. But, every way you interface with our applications or your services will not change at all. Why does OneSearch matter to our clients? This matters a lot to our clients. Their first experience and every experience they have with us starts with finding the right business. So, we stepped back and we asked ourselves, how can we improve this experience for our customers and how can we make it better? And so, we looked at all technologies available and we did an evaluation, and what we had was a deterministic solution but where we really needed to be was a probabilistic one. But the investment that the company or that we needed to make to get there is significant. But we saw that this is an important investment to make because of the improvements that it can drive for our customers, and the improvements it could drive for our customers are wide and varied. Whether it be an improved ROI because you're finding more businesses, or a faster processing time so you can do more jobs even quicker. Why is Experian investing in innovation and technology? Experian is investing in innovation and technology for two reasons. One, it's part of our culture, we're always investing in innovation and technology, whether it be this probabilistic search match algorithm, whether it be machine learning or whether it be A.I. We're always trying to innovate and always trying to drive new best practices in technology. Finally, we know the importance from our customer perspective. This is fundamental to their experience. And not only that, we recently partnered with Forrester to do a research study and found that over 85% of risk managers are looking to improve their risk management practices. 75% of those are willing to invest and purchase a solution within the next year. So we know how important this is to our customers, and the only way to get there is to innovate and always drive new technology. Learn More About OneSearch

This weeks guest post is by Katie Keitch, VP of Commercial Services at InsideARM. InsideARM is a media company who specializes in training for credit management professionals. To receive future articles, sign up to the InsideARM newsletter. Katie Keich, V.P. Commercial Services InsideARM It's 2019, we have IVR systems that sound like you are talking to a human. We have AI technology that can analyze and form collections treatment. We can process payment via SMS messaging. Is it silly to think that the "right" letter strategy could possibly outperform a live collector? A letter series is delivered most commonly today using e-mail and/or through the customer's account portal. Let's dig in. In my travels and conversations, a very succinct theme is the question, "Who collected the money? Did my collector's efforts bring in the cash? Or was it something else?" Often businesses can't be 100% sure if it was a collector's efforts that brought the money in or not. Did the customer just pay the bill on their own because they suddenly could afford to? How much of the money was recovered by no one making a call? Could a letter strategy replace a collector, or should it enhance the collector's efforts? These questions are normal things to consider. As a credit and collections leader, I think it's always important to give your collectors the ability to utilize as many resources and tools to enhance their efforts. Step One: Is your current letter strategy set up to aid the collector's efforts or compete with the collector? Are you using the letter strategy in tandem with a collector's dials or instead of their dials? You must decide if a letter series is going to replace the collector's efforts or if it is going to be assisting there collection efforts. Quick Exercise: If you'd like to put your collectors' efforts to the test, discontinue the use of customer touches via letter strategy. Create an escalated letter series that runs without a collector making a phone call. I would measure it for 60, 90, and 120 days and measure the collector's recovery rate. Is the collector performing at lower, higher or the same rate of recovery? How did the customers that never got phone calls and only got the letter series perform? How much cash came in without a collector calling? Step Two: Is your current letter strategy saying the same thing each time or does it have escalated intent in the verbiage? If you want to make the most of your letter series, they should look and sound different. Letter 1- Should be sent about a week before the invoice is due and include a copy of the invoice. This way, if they lost or didn't receive, the invoice for the first time, you are automatically re-sending. Letter 2- Should be sent a week after the invoice is due, notifying the customer you haven't received payment. If they want to avoid late fees, maximize discounts with you, etc. they should process payment immediately online. If you are sending this via email or pop-up message on their portal, the link should be included to process payment. Automatically offer the customer the discounted rate if they process payment before end of business day. If you don't have a payment portal, honor the discounted pricing with payment process via phone that day. Letter 3- Should be sent approximately 10 business days after letter 2 if payment still hasn't been received. You should be mentioning possible service interruption, loss of discounts and/or late fees if unresolved. You want it to be clear that the account is in jeopardy of service interruption if not resolved within 5 business days. Step Three: Does your letter strategy have dates and accountability? You want to ensure that urgency can be read in the tone and verbiage chosen. It shouldn't be open ended, and it should always offer the customer the ability to resolve the delinquency. If they haven't filed an invoice dispute with you by now, that's a problem. If you don't receive the payment be prepared to temporarily disrupt service. Letter 4- Should be sent approximately 5 business days after letter 3 if payment hasn't been received. You should include a date for service interruption, loss of discounts and/or late fees, and mention reporting the delinquency to the credit bureaus. Quick tip: If you want the customer to make you a priority than you should be reporting your delinquent customers monthly. You can set up to automatically send an aging report to the credit report providers. This is a great tool to help the customer in making you a priority for payment. Step Four: Does your letter series clearly communicate the penalties if payment is delinquent after service interruption? Does the customer understand if you have to send them to a third-party collection agency that they will incur additional costs? Letter 5- Should be sent 5 business days after letter 4. It should include an incentive to pay you immediately. However, it should clearly state if payment isn't received the incurred actions taken and fees associated. This should be your final demand for payment. My recommendation is for the letter strategy to be used in addition to collector calls. If you want to maximize the efforts of your collectors than you should use a dual strategy. Many organizations use a dual strategy today but don't sleep on the fact that you could have a very effective letter series, if developed and executed properly. Business Chat | LIVE Watch the interview we did with Katie Keich of InsideARM on best practices in planning your first collections call with your delinquent customer.

This weeks guest post is by Katie Keitch, VP of Commercial Services at InsideARM. InsideARM is a media company that specializes in training for credit management professionals. To receive future articles sign up to the InsideARM newsletter. Oftentimes organizations miss out on higher bad debt recoveries. The number one reason this happens is that they hold on to the debt for too long. It’s important in the onboarding process to start with the end in mind: setting yourself up for success by having mutually agreed payment terms, billing cycle, right party contact information, etc. However, even if you have done that all correctly from the start, some customers, unfortunately, aren’t able to pay for one reason or another. Here’s how to know when to cut bait and enlist the help of a 3rd party collections agency. Don’t ignore the warning signs Your customer isn’t paying within the agreed payment terms. Or maybe they were paying on time, but lately they have been pushing farther and farther out. Your customer is showing past due more often and/or farther past due than historically Your customer hasn’t paid you in the last 45+ days Your customer is 60+ day’s past due to their mutually agreed payment terms Your customer made broken promises to pay Your customer stopped taking your phone calls Your customer’s emails are suddenly not going through or the physical mailing address is returning mail to sender Be proactive in your communication Don’t be afraid to ask how things are going, especially if you noticed they are outside their normal payment cycle. Immediately offer alternative options instead of having to pay you the full past-due amount today. Set the expectation that it’s vitally important that they keep the communication lines open. If they have something come up, they need to call you. And always answer your calls. You have to be blunt and purposeful in your approach here so that they understand the commitment to you. Offer some alternative options  While it’s so important that your customer takes your calls, it’s equally important to give them attainable goals. If they feel that they have options, they are more likely to keep the lines of communication open. Alternative options might include things like offering the ability to make a small weekly payment towards the balance. Offer your customer the ability to continue doing business with you while making payments. The best way to accomplish this is to set the expectation they must remain current on the new invoices. Make the weekly payments smaller so they are able to keep to the commitment. Your customer can always call you and make additional payments. However, it's important that they stick to their original commitment. Ask your customer what is the dollar amount they can afford to pay weekly (hopefully automatically)? If the dollar amount is less than their normal spend, this is a sign that they can’t stay active as a customer. Give them the option to use alternative vendors until they can cover their average invoices plus the delinquent amount. Your stakeholders in Sales may not be immediately supportive. but they will thank you in the long run. Especially if they have chargebacks or are commissioned on collected revenue. Last, in my experience, customers appreciate that you recognize and don’t want to see them get to a place of debt they can't repay. The snowball effect of continuing to let a customer who can’t pay continue billing can be detrimental. No one wins, if your customer files for bankruptcy or worse, go out of business. Recommended exercise, review customers that haven’t made a payment to you in the last 45 days. These should be a top priority for collections. Make your goal to be first in line not last  Don’t miss out on collecting because you waited too long to send an account.  If you are working with a 3rd party collections agency, do you have an easy process for your collector to recognize it’s time to cut bait? Are the collectors being trained to recognize the warning signs and make quicker decisions? Don’t let your customers get into the 90 and 120-day buckets. They should already be with your third-party agency at that point. That is if you want an opportunity to recover the debt and fast. If you are using the steps outlined above, you should be seeing higher recoveries.    

The credit industry works very differently than it did even a few years ago. In recent years, new technology and the availability of analytics means that credit departments have much more information to make decisions. When both commercial and consumer data is used together, departments unlock a lot of powerful data that can be combined for more accurate decisions. However, some credit departments have not changed their processes and staffing structure. By using the traditional approaches even with new technology and data, credit departments are not able to see all of the possible benefits. I recently spoke on a panel of credit management executives at the High Radius Conference. During the talk, we touched on this topic and talked afterwards about what credit organizations need to do. Jan Minniti, Senior National Account Executive with the National Association of Credit Management mentioned that while many large organizations are using automation, even smaller shops can benefit as well. But her larger point was in order to transform, organizations must change the skill sets that they are recruiting, and expand training offered to current employees. Here are a few keys to help your organization transition to modern credit management: 1. Understand the recent evolution of credit models and technology As Minniti pointed out, we started out with general payment score models that were applied to everyone. However, today more specific models are available (for example, specific to an industry), so you can choose the best model depending on who you are selling to. These new models move us into a new generation where instead of making gut feel decisions or spreadsheets to track data, we can use statistics to not only assess risk, but also assign credit line increases. These scores and credit lines can then be fed to automated tools to manage the order-to-cash process. Even more importantly, we can use automated technology for account management strategies, which increase efficiency, maximize account potential and reduce fraud. In our experience at Experian, we have evidence that machine learning reduces manual reviews by as much as 74 percent. 2. Learn how credit managers can revise their role and processes Research recent changes in the financial services industry for inspiration on what is possible and how to help your department get to the next generation. Typically the FinTechs and large banks are on the leading edge of advances in risk management. By starting with analytics, the financial industry has driven a lot of innovation and change. They have also focused on data management to evolve to a frictionless environment. Think of how your company can incorporate these changes. But most importantly, how you as a credit manager can introduce and drive the change. 3. Revise the credit manager role to include more strategy Instead of shrinking from the change out of concern that technology will replace your role, credit managers need to lead the change. Start by learning what’s possible with regards to both technology and data. Share it with other credit managers and leadership to help your company be an early adopter. But, be careful not to fall into “shiny object syndrome”, where you use technology just because its available, even though it might not yet have the features you need. A solution in search of a problem is always a questionable approach. Minniti says that she knows changing the roles is challenging because it is a big shift and credit is not typically the shiny, new area of the company. However, to reduce risks and impact change, credit managers must seek greater visibility with the C-Suite. “Credit managers should educate management by using reports to show the importance to your company. Use data to show how much money you are saving the company,” says Minniti. “It’s also important to talk about automation, which actually helps credit managers stay relevant instead of replacing their jobs.” Having an automated credit strategy is also a great way to manage in times of turnover, or in trying to up level expertise. 4. Revising staffing and hiring guidelines Minniti says it starts by picking good analysts who can replace you. “If you staff with people who listen to what the machine learning is saying, but don't have the ability to think beyond that then who fills your shoes when you move on? What happens to the credit department?,” says Minniti. “We will always need people to tell the machine what to do, be able to adjust the model when the economy changes.” One of the biggest reasons that many managers and departments are resisting technology is fear of being replaced. This simply isn’t going to happen. Without the experience and background, credit models quickly decay. It is impossible to turn over all of the thinking behind credit decisions to machines. Someone needs to be there to manage the ongoing performance of the models, and make sure the analytics track with changes in the marketplace. Credit departments that take initiative to lead the change, to use the new technology and models, will demonstrate their value to their organization. By using automation and machine learning, the credit department becomes more valuable to the organization instead of less. By proactively managing the change and taking the lead, you can set your department on the right path to lead the transformation of your company as well as the credit industry.

In this week's guest post,  Scott Blakeley shares perspectives on a growing trend in business - Terms Pushback (TPB). Scott is the founder of Blakeley, LLP, a noted expert in the field of creditors’ rights, commercial law, e-commerce and bankruptcy law. Scott regularly speaks to industry groups around the country and via monthly webcasts on the topics of creditors rights and bankruptcy. After a slow sales quarter, a large retail clothing store needs to improve their working capital and cash flow. Before the 2008 recession, the retailer likely would have turned to traditional business credit options. However, after the downturn, lenders changed their qualifications and terms, making traditional credit options a much less desirable option. In some cases, retailers, especially midsize or new businesses, can no longer even qualify for traditional credit sources. Businesses are now increasingly renegotiating their payment terms with suppliers through a program called Terms Pushback (TPB). When a jewelry retailer reviews its payment terms, for example, it sees that the main vendor supplier for jewelry currently requires payment 15 days after delivery. As a deliberate strategy — which is different from a company not having the money to pay its bill — to give the retailer more working capital, they reach out to ask the supplier to change the terms to 30 days. This means they would have access to the money paid to the vendor for 15 days longer; this process is often referred to as trade credit. Credit Today found that the most common extension is for 16 to 30 days, with 45% reporting this range as the most common extension. Impact of Terms Pushback on Suppliers While TPB improves cash flow for customers, it causes issues for suppliers because they must wait longer for their payment. Many consultants are now actively recommending TPB as a best practice. Because international companies more commonly using this strategy, many U.S.-based companies are adopting it due to international influence. Companies operating as middlemen between retailers and manufacturers often face the biggest challenges. Longer terms mean that they have less capital to buy more products and have a higher number of outstanding receivables. Additionally, businesses have lower cash conversion metrics, which can hurt publicly traded companies and cause concern for shareholders. According to Credit Today Bench-marking, 19% of suppliers always or usually say no to requests for extended terms, and 3% usually agree. Interestingly, 4% report that their answer depends on customer size — yes to large customers and no to small customers. However, the majority (63%) of businesses review the requests on their individual merits. However, denying the request often has long-term ramifications. If the business denies the request, the customer must pay or suffer credit damage. Customers often get around this by paying late enough to improve their own cash flow but before credit damage occurs. Even more challenging, suppliers are often hesitant to report customers to credit bureaus because this often permanently damages or even ends the relationship. If a supplier denies the request, the majority of options to get the payment are punitive. For example, the supplier can charge a late fee for payment. However, the customer may still decide that the value of the money for the extra days is worth more than the late fee. Other avenues include implementing a credit hold, having two price lists, terminating credit, firing the customer and reporting the customer to industry groups. However, each of these options permanently damages and probably ends the customer relationship, which may result in loss of a high volume of sales. Effectively Managing Terms Pushback with Supply Chain Finance Programs Supply Chain Finance programs are asset-based lending programs structured to improve a customer’s payment terms, reduce costs and improve cash flow enabling financial institutions to pay suppliers for invoiced services. Suppliers can benefit from SCFP as it receives payment within normal terms or earlier which helps keep the credit team’s credit scoring and risk models consistent. The customers benefits as well as their capital is not tied up in day-to-day operational payments and creates more reinvestment opportunities. When a company receives a TPB request, the first step is evaluating the customer — their credit, the risk, the volume of business and the value of the relationship for the supplier. Often, larger companies have an advantage over smaller companies when negotiating term extensions because their business relationship is worth more to the customer than the monetary value of the shorter term. Here are three best practices to managing TPB requests: Offer incentives for shorter terms. Instead of punitive actions, consider giving customers who pay within shorter terms a discount or an annual volume discount for consistent payment with shorter terms. Actively monitor threshold for customers with extended terms. Suppliers must effectively manage their own cash flow to make payroll and other expenses. By extending too many customer terms, suppliers can jeopardize their own financial stability. Create a team to evaluate requests. By establishing a process to handle the requests and a team to formally evaluate requests, suppliers can more effectively evaluate all aspects of the decision, such as the risks of extending to its own financial health and the risk of losing the client relationship. With a team made representing stakeholders from different departments, all perspectives can be represented and considered. As TPB becomes more common as a strategy, suppliers must proactively create a process to manage requests. Often, extending the terms can improve the customer relationship and even increase the amount ultimately paid. By creating a team and strategy, suppliers can make the smartest decision and actively manage pushback requests. Scott Blakeley is a founder of Blakeley LLP, where he advises companies around the United States and Canada regarding creditors’ rights, commercial law, e-commerce and bankruptcy law. He was selected as one of the 50 most influential people in commercial credit by Credit Today. He is contributing editor for NACM’s Credit Manual of Commercial Law, contributing editor for American Bankruptcy Institute’s Manual of Reclamation Laws, and author of A History of Bankruptcy Preference Law, published by ABI. Credit Research Foundation has published his manuals entitled The Credit Professional’s Guide to Bankruptcy, Serving On A Creditors’ Committee and Commencing An Involuntary Bankruptcy Petition. Scott has published dozens of articles and manuals in the area of creditors’ rights, commercial law, e-commerce and bankruptcy in such publications as Business Credit, Managing Credit, Receivables & Collections, Norton’s Bankruptcy Review and the Practicing Law Institute, and speaks frequently to credit industry groups regarding these topics throughout the country. He is a member on the board of editors for the California Bankruptcy Journal, and is co-chair of the sub-committee of unsecured creditors’ Committee of the ABI. Scott holds an B.S. from Pepperdine University, an M.B.A. from Loyola University and a law degree from Southwestern University. He served as law clerk to Bankruptcy Judge John J. Wilson. He is admitted to the Bar of California.

Serving commercial Property & Casualty insurers is a major objective of 3rd parties in the analytics and data space. This industry vertical is one in which standard credit tools already apply to the carrier’s challenge in managing claims risk; there is continued investment within and beyond the industry in developing innovative tools for this purpose. However, a smooth roll out of such tools at scale requires a comprehensive understanding of the regulatory process and its constraints. US Insurance industry- overall regulatory structure: Currently, US carriers are regulated primarily by the individual states, a result of the 1945 McCarran Ferguson Act (“MFA”). Less known is that the MFA was presaged by the Paul v Virginia decision (1869, later overturned by SCOTUS) that held that issuing an insurance policy was not a commercial transaction! [1]. Federal regulatory guidance, ultimately from the Office of the Controller of the Currency (OCC) and the Federal Reserve Board (FRB), is implemented via the National Association of Insurance Commissioners (“NAIC”; see below). NAIC organizes the insurance commissioners from all 50 states, Washington DC, and territories. NAIC maintains legislative databases, market conduct standards, industry financial reporting, conducts training, and many other functions. NAIC provides supervisory guidance for the use of models used to predict insurance loss risk. Among other functions, NAIC has created the Own Risk and Solvency Assessment (“ORSA”) framework which implements existing OCC and FRB guidance to the states. Capital reserves needed for solvency as well as business conduct -- including product definition and general business operations, licensing, maintaining a guaranty fund, underwriting, and rate setting-- are determined primarily by the states in which the carrier operates [2]. Today’s system of state-by-state regulation is more challenging than an equivalent centralized regulating body; insurance carriers operate increasingly online, driving the need for multi-state operations which in turn require multistate licensing and complex regulatory compliance. The average property liability firm has 16 state licenses, while the average life insurance carrier has 25. The coordination of state insurance laws, as well as many other quasi-governmental insurance industry functions, falls under the aegis of the NAIC. We will focus our discussion here on the regulation of risk models. How should third parties align the model building with regulatory requirements? Example 1: Basic filing and disclosure protocol: Responsibility to disclose to state regulators typically lies with the developer or the owner of the model. Disclosure responsibility for custom risk models built around the data of a specific client insurer resides with the insurer, while industry standard models used for multiple clients are typically disclosed by the model developer. Reporting and disclosure requirements vary by state. While the most central functions of interest by state regulators are underwriting and rate setting, any other use of models by insurers may be subject to regulatory disclosure. Models used to assess loss risk for rate setting or underwriting purposes are typically examined for discriminatory impact and use of prohibited data in addition to adequate risk performance and numerical stability. “Prohibited data” varies by state but may include certain data elements gleaned from in-state residents, federal crime data, certain credit data elements, traffic violations exceeding a specified age on the books, or other data; the section below deals with credit data. Finally, the requirement to disclose model details such as attributes and weightings also vary between states, and may require the developer to invoke trade secret status for the subject models to avoid disclosure to the public (implicit in many states). The adjudication of such claims is variable between states, as are all communications with regulators on this topic. Example 2: Use of consumer credit information to underwrite personal insurance policies: Using credit information in models to predict loss risk on personal insurance contracts also has a rich and extremely active history in the US. P&C insurers have generally found that credit risk and claims risk are positively correlated. They have used credit data on individual consumers to various degrees. Notably, the Consumer- Based Insurance Score (CBIS) employs consumer credit parameters and has been used across the insurance industry since 1993. Amid vigorous debate, states have seen active legislative attempts to restrict and define allowable use of consumer credit data by insurers. Credit information in some cases can outweigh a consumer’s driving record in setting rates- leading to the bitter but factual observation that excellent consumer credit can literally outweigh a DUI conviction in some states and conditions. In 2016 alone, the state legislative actions below were considered and/or enacted; note once again that the ability of individual states to regulate independently greatly complicates the picture for large carriers operating in multiple states:  California, Hawaii, and Massachusetts do not appear in the table above. In those states, consumer credit information cannot be used to underwrite personal auto policies. Example 3: Reporting channel: State regulators typically require use of the System for Electronic Rate and Form Filing (“SERFF”) database maintained by NAIC for formal submissions: https://login.serff.com/serff/ What’s coming down the road? We have seen examples of the dependence of applicable insurance regulations on individual state laws; the mechanics of model development requires understanding and working with these restrictions. Basic filing and disclosure, permissible model variables, the proprietary status of model detail, and the use of certain consumer information (e.g., credit scores, driving records) are all aspects of risk models whose successful execution depends on understanding the widely variable set of existing state regulations. Several authors have cited the need for a shift in the underlying regulatory structure of the industry from state-based to a national system, citing the inefficiency of the licensing process and the true interstate nature of today’s distribution system. A centralized federal insurance regulatory body would simplify interstate compliance by carriers, but would also introduce other complications. However, it appears prudent in the near-term for 3rd parties developing models to gain awareness of, and streamline, current requirements for regulatory compliance at the state level. Conclusion: There is a considerable additional value that the next generation of models will contribute to the commercial P&C vertical. Insurers and 3rd party developers have demonstrated the applicability of their models and data reports, offering competitive added value with standard risk scores adapted from the credit domain. However, promoting these products more broadly and expanding the product offerings themselves into cyber risk, commercial linkages, and various other tools for insurers, the insurance industry faces efficiency hurdles from our 50-state regulatory framework. With any regulatory centralization unlikely near term, 3rd parties thus need to gain working fluency in NAIC and in the SERFF database, anticipate state-level documentation and disclosure requirements, and attain a level of familiarity with state regulatory machines that enables the management of the interests of their clients with confidence. How Experian can help you Experian provides analytical services for Property & Casualty as well as other insurance product verticals. To enable you to assess claims risk at the time of policy application (or renewal), we either apply standard risk models or develop custom risk models to your underwriting and rate-setting processes. To help you guard against cyber fraud, false identity, and reputation risk, we offer specialty products as well. We also offer special purpose, custom analyses on request, and we sell curated commercial data to your standards as well. References: [1] Brookings Institute. paper on future of regulation- Grace & Klein [2] Insurance Information Institute: Regulation [3] Grant Thornton: ORSA requirements: Model Risk Management for Insurance Companies [4] Blueprint for a Modernized Financial Regulatory Structure, Dept. of Treas., 2008  

Today we are very proud to be taking the wrapper off the next generation of our flagship commercial credit management application, BusinessIQSM 2.0. To meet the ever-changing needs of our clients, we continue to grow and modernize with them.  This innovative and powerful analytical web-based application is designed for commercial enterprise and small-business risk management. From the new interface and side bar navigation to enhanced search and match technology, to judgmental and rules-based scorecards, all the way to custom model scores, Experian’s BusinessIQ 2.0 has something for everyone. Let Experian meet you where you are and take you to where you want to be. BusinessIQ 2.0 Overview In this video we highlight some of the key features of BusinessIQ 2.0. Learn more by going to: