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Applications of Forecasting Firms

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Argosy University

June 11, 2018

In business, forecasting is simply defined as a planning tool that supports management in its attempt to cope with the uncertainty of the future, relying mainly on data from the past and present and analysis of trends (). Forecasting considers specific assumptions based off the market or a company’s past and current information from experiences and decisions. There are many models that can be used by organizations as forecasting methods, such as trend projection and the Delphi Method (). Many models operate by using the information provided from the company’s numbers, market statistics, and other calculations to help analyze financial information for organizations.

I’ve been employed as an Underwriter in the insurance industry for the last ten and a half years. The insurance industry is considered a financial institution in looking at the way companies operate in the field. While being in underwriting, I have worked with several tools that analyze risks daily. We have an actuarial team that works behind the scenes to build forecasting tools that are to be used to assist us in determining if potential risks are worth taking or how a current risk is functioning. In this industry, we are mostly analyzing a risk by is losses i.e. claims and exposures. Exposures in the insurance industry are gross sales, payrolls, or number of automobiles for a company. Basically, our forecasting model is used to estimate the primary loss rate, claim counts, and needed security levels for prospective and renewal business accounts to get to a target premium. Our forecasting model analyzes and forecasts Worker’s Compensation, General Liability, and Auto Liability lines of business. The model considers many factors to assist in helping us to make the right decisions for the organization. It is the most valuable tool that we utilize internally and is the one model that is constantly being updated, so that we are indeed making the right decisions using the best calculations for any of the potential risks. Our forecasting model uses several different graphs that provides the company with benchmark rates. This is typically how many insurance organizations analyze risks and determine pricing for risks.

Works Cited

forecasting. BusinessDictionary.com. Retrieved June 05, 2018, from

BusinessDictionary.com website: http://www.businessdictionary.com/definition/forecasting.html