The days of insurers monitoring and changing prices on a weekly basis are long gone.
As ever greater numbers of consumers test the market to buy their insurance, the importance of a dynamic as well as robust pricing strategy has never been more important.
Whether you’re pricing to grow your customers or your margin, there are a range of tools available to support insurers in their quest to find the perfect price. The challenge for some, however is what we call ‘drowning in data’. You may have a bucketload of information, but do you have actionable insight?
It’s best to start by considering your specific position in the market. You can’t optimise until you know what you’re up against, and what you need to do to win. Pricing is not purely a numbers game. We all know how price-sensitive consumers are, but it’s not the only influence on their behaviour. If your brand is less well-known, for example, you’ll need to achieve consistently prominent rankings on aggregators in order to secure the customer. Conversely, for bigger brands, you don’t necessarily need to top the list to succeed. It all depends on who’s around you.
What you do need, in order to get to a place where pricing optimisation can happen — and in as close to real-time as possible — is to augment your knowledge with third party data, and to segment your customer base.
It’s no longer enough to see you’re ahead, or behind. Now you need to know exactly for whom, and by how much. To make it clear, we’ve recently developed client heatmaps. Whether it’s looking at your quotability (%), your Top 5 quoted risks (%), or for benchmarking against a key competitor, they can provide a simple and clear view of not only what’s working, but if it’s working too well. This is what we call ‘left on the table’ — that is, when you’ve not only won the bid for the customer, but you’ve won it with room to spare. In other words, you’re paying over the odds.
Quotability Heatmap segmented by age
Are you appearing where you want to?
Competitor benchmarking — T5 % quotes
Where are you ahead of — or behind — your key competitors?
Despite not directly controlling their own pricing, brokers can also prosper by ensuring they have competitive panel members for the segments of the market they are targeting.
Whether you’re a direct player or an intermediary, by knowing the market, who’s playing where and where you want to compete, you can align your pricing strategy to meet your goals.
In this paper, we explore the current best practice in insurance pricing and give you some guidance about where the industry is about to go next.