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.
DATA-DRIVEN
1. Data in the industry consist of 3bparts, data mining, predictive modelling and analytic.
2. Data mining finds patterns in historic data and is a precursor to predictive modelling. Techniques can go from simple, complex to hard to understand. Not much use on its own and needs business context on interpretation.
3. Predictive modelling quantifies relationships to predict future behaviour. Promotes transparency in methods. Any Extrapolating into future requires further understanding.
4. Analytics - Combination of techniques and analyses.
5. The value of collecting, analyzing and mining of data becomes an urgent necessity both at the insurance company and at the industry level.
MOTOR PRICING IN REGULATED MARKET
1. Underwriters rely on "tariff" rates and technical premiums.
2. With the given info, they segment and target profitable customers and underwrite to exclude certain segments.
3. This would result in predictable cross subsidies. The practice of charging higher prices to one group of consumers in order to subsidize lower prices for another group.
4. Target Market strategies in a tariff market would include agent commissions, profit share arrangements, sales management targets, bundling discounts.
5. Key underwriting strategies would include avoiding loss making segments and exclude policies where expected loss cost is higher than threshold.
