Companies must understand customers’ needs and design their products, business structures and services accordingly.
It takes considerably more to effectively reach an insurance customer than just setting prices and going to market.
Customers have increasingly high expectations about products and services. They are concerned with brand, flexible coverage, ease of access, claim acceptance and claim service. Competitive pricing is taken for granted. Companies must understand these needs and design their products, business structures and services accordingly.
Technical pricing is more than just determining the right rating factors to use in grouping the market into homogeneous pools of risk, each of which can be priced separately. Consideration needs to be given to price elasticity, the potential for anti-selection, retention of existing clients, what competitors are doing and which segments of the market to underwrite.
The ultimate price charged may differ from the technically correct price in order to cope with market realities. However, this should not undermine the importance of calculating the technically correct price. It provides a useful position for understanding the financial and business consequences of subsequent marketing decisions.
In developing a successful positioning strategy, a company needs to have an operational plan to make the underwriting strategy work.
A requirement to focus on social issues rather than profit, may result in considerably different strategies for a public sector entity. For instance, varying degrees of cross-subsidisation may be desirable, compliance may be an additional responsibility and financial performance capital requirements and risk management may be measured differently. Some markets will also have restrictions on pricing which will have to be complied with.
Key specialist: Michael Playford
 | Relevant experience:
- General insurance specialist
- Actuary for the NSW Workers’ Compensation Premium Rating Bureau, developing an innovative risk premium methodology to be used by all insurers participating in the NSW privatised market
- Adviser to insurers on strategic, operational and premium methodology matters for entry into the privatised NSW workers’ compensation market
- Advising the Russian Federation Social Insurance Fund on all aspects of scheme design and reform, with particular emphasis on funding methodology.
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