Optimal customer selection for cross-selling of financial services products

Author(s):

Jens Nielsen

 et al.

In this research a new methodology for optimal customer selection in cross-selling of financial services products, such as mortgage loans and non life insurance contracts, is presented. Financial services companies tend to possess significant databases and a long relationship with each customer. In this situation the challenge becomes to use the database in general and specific knowledge of the individual target to estimate the probability of a cross-sale, the cost of a cross-sale attempt, the average discounted future profit and the uncertainty of the profit of the entire cross-sale attempt for that individual. Once reliable estimates for the stochastics of the cross-sale process have been established, one can optimise the cross-sale profit according to a variety of criteria including return and risk. In this paper, we first consider the simple question of optimising the average profit, but we also consider one version of adjusting for risk when optimising cross-sale profits. Our extensive case study is taken from non-life insurance, where our sales probability model is provided to us by the company that also provided us with the data.

Updated: 05/01/2015
Comments: 10
Views: 3,207

How financial services companies can use existing customer data to identify cross-selling opportunities.

Author(s):

Jens Nielsen

 et al.

Financial services companies wishing to increase their sales may look to their existing customer base for cross-selling opportunities. Information on customer behaviour can be analysed to assess whether or not more products should be offered. In particular, data on past claiming history and information on payment defaulting can be useful in determining how an individual customer is likely to act with another type of product. This study demonstrates a method for using historical information to both identify potential customers for cross-selling and assess their 'risk profile'. It may help companies improve their marketing to existing customers, and ultimately lead to higher profits.

Updated: 05/01/2015
Comments: 12
Views: 7,773

Adding Prior Knowledge to Quantitative Operational Risk Models

Author(s):

Jens Nielsen

 et al.

An analysis of the fundamental issues that arise in practice when modeling operational risk data. This paper addresses the statistical problem of estimating an operational risk distribution, both abundant data situations and when available data is challenged from the inclusion of external data or because of underreporting.

Updated: 01/01/2015
Comments: 4
Views: 2,921

Investigating the broken-heart effect

Author(s):

Jaap Spreeuw

 et al.

The traditional assumption made in life insurance about the independence of the remaining lifetimes of a couple has come under greater scrutiny recently.

In this paper, the researchers postulate that dependence between coupled lifetimes is of a short-term type. Evidence is found that mortality rates increase after the death of a partner and, in addition, that this phenomenon diminishes over time.

Updated: 14/01/2013
Comments:
Views: 4,404

Retirement savings is an industrial issue

Author(s):

Chris Rowley

 et al.

While many pension provisions in the private sector have been eroded over the years, the 2008 financial crisis ratcheted up changes.

With this in mind, Dr Carol Royal, Visiting Fellow at Cass Business School, and Professor Chris Rowley suggest that superannuation is an industrial relations issue, and it should not be separated from wage negotiations.

Updated: 14/01/2013
Comments:
Views: 3,960

Optimal risk transfers in insurance groups

Author(s):

Vali Asimit

 et al.

Insurance groups often comprise a number of distinct legal entities, operating in different territories. Diversification across an insurance group is no trivial matter and the way it operates depends on the group's legal structure.

In comparison to previous literature on this topic, the focus here is on deriving optimal functional forms of risk transfers. Read the full article and let us know what you think.

Updated: 14/01/2013
Comments:
Views: 4,539

A savings plan with targeted contributions

Author(s):

Iqbal Owadally

 et al.

With the cost of living on the rise and job certainty in doubt, many people are putting aside funds to meet a certain demand in the future. This could be for a child's education, a new property or a pension.

Two decisions must be made: how much the monthly contributions will be and where the money will be invested. This paper considers the first of those decisions. Would you prefer to save a fixed amount of money each month or alter your contributions according to income and circumstance?

Updated: 14/01/2013
Comments:
Views: 4,289

UK state pension reform in a public choice framework

Social security systems for old age have been explicitly studied in a public choice framework for over 30 years. They illustrate extremely well the problems of allocating economic resources through a system of voting.

This paper examines the incentives facing voters to expand state pension provision and the possibilities of reducing state pension provision by increasing state pension age. As such it is of great relevance for the study of policy in ageing societies where implicit pension liabilities are increasing and will prove difficult to reduce.

Updated: 14/01/2013
Comments:
Views: 5,093

Optimal capital allocation principles

This paper develops a unifying framework for allocating the aggregate capital of a financial firm to its business units.

Updated: 06/03/2012
Comments:
Views: 19,862