Inductis, a global management consulting and analytics services firm, has released a white paper on “Emerging Trends in Auto Insurance Pricing.”
The paper, written by Mr. Arnab Dey, a Principal, Ritesh Aggarwal, a Lead Project Manager at Inductis, and Frank Cacchione, Associate Partner, Inductis and CEO, TNC Management Group, addresses the fact that to remain competitive, insurers must constantly improve the assessments of their true levels of risk and price policyholders accordingly.
“Traditionally, the U.S. auto insurance industry relied on loss ratio models, used limited external data, had a compartmentalized model structure and used variables that were difficult to obtain accurately. Today, led by a few insurers, the industry is headed towards pure premium modeling at individual coverage level using extensive external data and variables that can be verified,” Dey said.
The industry is headed toward pure premium modeling at individual coverage level using extensive external data and variables that can be verified. Those companies are also improving their data collection process so that they have access to richer information to make better pricing decisions, the paper indicated.
“The industry also needs to focus on more accurately allocating non-loss related expenses such as acquisition expenses into the pricing structure as opposed to traditional fixed load methods,” Aggarwal said.
The paper discusses the five key levers that companies need to master to effectively leverage the power of data and analysis to drive profitable growth through improved pricing: data preparation, modeling approach, model structure, use of external data and allocation of other expenses.
“While the industry continues to face challenges such as regulatory restrictions on use of certain variables, difference across states and data integration across the organization, companies that embrace these new techniques while managing the market challenges will emerge winners in the next few years at the expense of those who continue to rely on outdated methods that can lead to further erosion of market share and adverse risk selection,” Cacchione said.
The paper emphasized that as the industry evolves and better uses the tools at its disposal, companies that quickly adopt these advanced analytical methods will emerge winners over the coming years.
For more information, contact: Pallavi Kumar at email@example.com. Phone: 908-743-1100 ext. 1806.
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