Understanding A Detariff Market - Part 2

Continuation from Understanding A Detariff Market - Part 1

Understanding A Detariff Market - Part 1

MARKETS ARE CHANGING
1. Global trends are increasing competition and creating customers who demand more.

2. Trends such as rate deregulation, distribution changes, IT, consumer awareness and claims inflation are leading towards higher costs.

3. This brings data-driven strategy into our discussion on market detariffication.

4.In a de-tariffed market, there is a penalty for bad pricing and it increases with competition.

Insurance Rate Monitoring - Part 2

YEARLY VARIATIONS

1. If we consider a base underwriting year where nothing major happened, then a policy renewing in January the following year on ‘as before’ terms can be treated in the same way as if it renewed ‘as before’ in August (base year). 

2. However, if the base underwriting year had a large systemic event in July, then a policy renewing ‘as before’ in January would be on considerably weaker terms than if it renewed ‘as before’ in August. This is allowed by tracking the IELR at a policy level.

3. Below is an example to explain the importance of tracking the IELR between a policy and class level.

Insurance Rate Monitoring - Part 1

1. Rate monitoring has become one of the hot topics in general insurance. 

2.Underwriters are starting to see the importance of managing the underwriting cycle in a softening market. 

3. It is important to monitor the rate movements on business quickly and accurately in order to shorten the period before any disruption to the business plan assumptions are detected and acted upon.

4. Many people focus solely on the rate movements on renewal business while neglecting the absolute profitability of the renewing business (not just its relative profitability as compared to last year) and the profitability of lapsed and new business.