October 2016

OPTIMAL PRICINGA LIFE INSURANCE PRICING MATURITY FRAMEWORK

CONTENTS

1. Introduction

2. A failure to innovate

3. Parallels to other industries

4. Issues with the current pricing process

5. Future requirements

6. The pricing maturity model

October 2016Benchmarking Pricing3

One of the issues is that life insurers have been pricing products roughly the same way for so long that it’s hard for them to imagine anything radically different. Of course there are many factors contributing to the lack of innovation in this area, but it all leads to the same conclusion: life insurance pricing is failing to produce an optimal result.

The life insurance industry’s resistance to change mimics attitudes across various industries that, with hindsight, we can see clearly failed to react to market pressures and change. The lessons we can gain from disruption in the banking industry and the travel and transportation markets should be a spur in the side of insurers looking to survive and flourish during this transition period.

1. INTRODUCTION

In order to definitively assess the state of pricing in the market, we have developed a Pricing Maturity Model in collaboration with industry experts. This model provides a framework from which life insurers can assess their pricing process and recognise where there is room for improvement.

For insurers to keep up with the currently increasing pace of change, we propose that a shift in thinking is required. Insurers need to view the pricing process as an integral factor in the overall health of their organisation. Improving the pricing process provides a prime opportunity for insurers to grow the bottom line, making them more robust in order to weather the coming tides of change.

Pricing is often overlooked when updating life insurance processes. In the broader scheme of things it’s often ignored in lieu of more pressing matters. That is until something goes wrong.

Life insurers have been pricing products roughly the same way for so long that change is hard to imagine.

October 2016Benchmarking Pricing4

It’s no secret that many view the insurance industry as a collection of dinosaurs. It’s almost an overdone subject for tech and insurance thought leaders. Take, for example, the following headlines from the past year: Tech Startups Are Prodding the Dinosaur That Is the Insurance Industry, Insurers lack a ‘culture of innovation’, research says, Insurance is ready for an upgrade.

It seems like the life insurance industry has been doing things more or less the same way for so long that they struggle to see any other possibilities. There is hope though; we are starting to see a better rate of change, but only very recently. For example most insurers have recognised the need to update legacy systems and improve their customer’s experience, but progress in making that happen is understandably slow.

The hard truth is that the insurance landscape is changing and life insurance in particular is lacking growth. Profit margins are being eroded, and numbers are often not cutting it for shareholders. Insurers need to be taking smarter steps to at least keep up with the speed of change and to not get run over.

The question is where to focus first? What should be the next frontier for insurance innovation? There are plenty of big ticket changes that require a lot of time and effort, and should definitely be a part of a longer term strategy (ie updating core systems), but alongside those there are much smaller, easier changes that will return almost immediate results. One of these areas is pricing, where there is a lot of room to improve tools and processes and very little risk involved in doing so. When done well, pricing can also be an enabler of further innovation within the organisation, for example as a platform for adopting a customer view.

Most insurers aren’t looking at the pricing process for the fix, but pricing is one area of life business that is currently leaving a lot of money on the table. A large majority of insurers, for example, are reactionary in their pricing, competing mostly on price and features, without optimising the price for this strategy. We can see that in a market of slow or no growth that competing over price diminishes profit margins, and with low margins, adding a few percentage points to your profit makes a huge difference. Optimising pricing can help add those few points.

2. A FAILURE TO INNOVATE

Competing on price verse competing on value

October 2016Benchmarking Pricing5

This is going to hurt if nothing changes. While no one can predict the future, we can make some well informed predictions by looking at other industries that have faced similar levels of disruption. For some stark examples take a look at the changes in media industries like film and TV or Borders book store’s failure to change with the times.

DVDsThere are very few blockbuster stores left. Netflix is steadily growing revenue, and very few laptops still come with dvd slots. The film and TV industry have had to drastically change tactics to curb online pirating and profit for legal, paid downloading. Although the industry is starting to adapt, its evolution has not come without substantial pain and lost revenue.

Borders BookstoreBorders Bookstore began closing stores en masse in 2011. Its demise was accelerated by its failure to accept some key market changes. First, it was too late to the web. It outsourced its online book selling to Amazon, not wanting to invest in its own online store. This of course cut into its customer base and gave a larger piece of the pie to Amazon later on. It was also too late to late to e-books, resisting any substantial investment into the new format until it was too late.

Both of these examples illustrate traditional industry leaders’ failure to adapt to new methods of consumption and new market forces. Life insurers need to take note.

3. PARALLELS TO OTHER INDUSTRIES

October 2016Benchmarking Pricing6

Pressure and/or awareness of the shortcomings of the current process traditionally hasn’t been there to incentivise most insurers to think further ahead. It’s tempting to settle for what’s ‘good enough’, to get comfortable because you’re doing what everyone else is doing. This failure to innovate is one of the key reasons that industries stagnate and current dominators get left behind.

In recent times, thanks to challenging market conditions and low growth, insurance companies are looking for ways to improve profitability. The pricing process is a key area where significant improvement can be made with a relatively low investment. To improve pricing, increased awareness of the various issues with the current process is required.

Most insurers are at a very similar stage of maturity in their pricing process. In the below paragraphs we provide further detail on what the key issues are, how to improve the process, and what the benefits could potentially be. We then present the pricing maturity benchmarking framework.

Product Development ProcessPricing is a significant part of the product development process. Most products are repriced annually as part of the annual product update. During the year insurers launch campaigns such as incentivising advisors or offering a temporary premium discount using a simplified pricing process.

For the remainder of this section we focus on the pricing process part of the annual new product update.

The product development process usually follows the following sequential steps:

1. Ideation2. Feasibility3. Product design4. Product pricing5. IT implementation6. Launch

4. ISSUES WITH THE CURRENT PRICING PROCESS

October 2016Benchmarking Pricing7

This mostly sequential process from ideation to launch usually takes around 9 months, with between 3 and 5 months dedicated to the pricing process. IT Implementation takes account for the majority of the remainder of the product development cycle. This slow speed to market essentially hobbles insurers when it comes to responding to market changes or outside threats. Since speeding up the IT Implementation process requires very large investments, the pricing process is the obvious place to look to for improving the length of the product development process.

The pricing process starts after the product design process and before IT implementation. Product launch deadlines cannot be easily changed, nor can the time required for IT implementation. On top of this, product pricing cannot usually progress well without having the product design finalised. This is why the pricing process is usually the part of the product design process that is most under time pressure.

A significant number of companies use some form of segmented revenue to understand which customer segments for which product generate the majority of revenue. This then helps them to determine which customer segment to focus on for product design.

However, in life insurance, profit margins vary significantly from customer segment to customer segment. A representative example of premium margin distribution:

Example of premium margin distribution

Using segmented profitability information as well as revenue will enable companies to find significantly better customer segments to focus on.

Pricing is a key aspect of the process but it is usually not taken fully into account by insurance companies. A client however, will take both design and price into account when deciding between product A or B. So why do we first design the product and then price it, without understanding whether it can be competitive enough to actually sell profitably? Of course, when we find out we can’t sell a design at acceptable profit levels, we go back to the drawing board. But this process is very likely to result in a sub-par product, because several design options are left unexplored from a profitability point of view.

The key reason this less than ideal process is applied is that pricing in its current state takes too long. It leaves no time to explore multiple designs while still taking profitability into account. The other issue of course is that insurers may lack the experience to reliably set assumptions for specific product features or products.

October 2016Benchmarking Pricing8

Product Pricing ProcessThe following example outlines a commonly applied pricing process in the industry:

1. Set Pricing Brief Optimise value of new business with a minimum competitive pricing position around the 25th percentile of comparable products.

2. Iterate towards optimal pricing

a. Pricing actuaries in conjunction with the product team, who usually perform the competitive analysis, iterate towards a better pricing structure than the current one (in the case of a reprice and relatively small product changes) based on the pricing brief. This is usually a linear process, and the pricing actuaries and product team need to wait for each other at various stages.

b. Proposed pricing scenarios are also discussed with wider stakeholders, typically sales, marketing and underwriting. When all parties’ requirements are met, the new pricing will be proposed for sign off. Often, this is just an acceptable solution, not necessarily the optimal one, as there is not enough time to explore all options.

c. It takes pricing actuaries and product teams about 1 to 2 weeks to generate the next scenario, i.e. proposed pricing, as it takes 1 to 2 days to perform a new run including competitive analysis and it will take a few runs to generate a new scenario that is ready for discussion. This is then discussed with wider stakeholders: underwriting and sales and marketing. Suggestions are often made by these stakeholders for the next scenario. These are usually tactical suggestions to find a better price, rather than strategic. A significantly better situation would be if stakeholder would discuss pricing strategy and the pricing actuary would provide the optimal pricing solution for that strategy instead of wider stakeholders getting involved in pricing tactics. This also requires each of the stakeholders to very clearly state their requirements as part of the pricing brief, which would provide clarity in the process and most likely better alignment between sales and marketing, and underwriting strategies and the pricing strategy.

d. Often, timelines are too short to iterate to a pricing solution that fully satisfies all stakeholders, especially given the competitiveness of the market. Given fixed IT timelines, a compromise often needs to be made and proposed for sign off.

3. Actuarial pricing review

a. Before the new pricing can be signed off some form of actuarial review is performed to:

b. Ensure no significant errors have been made, and

c. The impact on valuation is estimated

d. To ensure the review passes without issues, pricing actuaries usually perform various checks against the valuation model. However, during the iterative pricing process modelling changes are made, which, due to time pressure, may not always be reviewed before they are used. The fact that pricing actuaries are usually not experts on valuation models adds additional risks. When they do happen, reviews are often rushed due to limited timelines. Errors found can create significant issues and inflate IT expenses.

4. Sign off

a. New pricing is usually signed off by a committee. The sign off process can be either a relatively short formality or an elaborate one, depending on governance structures and compliance requirements. Australian insurers or overseas branches from Australian insurers require the Australian Appointed Actuary (AA) to sign off. The AA is usually very difficult to get hold off. When insurers are part of a large multi national, product pricing needs to be signed off by the Head Office. Both sign offs require a substantial amount of time. Often the IT implementation ends up taking place during the sign off process, which can create substantial issues if changes are required.

October 2016Benchmarking Pricing9

Actuarial Pricing ModellingMost companies use the valuation model as a basis for the pricing model. However, there are significant differences between the actuarial pricing modelling and valuation modelling. Some of the more noticeable differences are:

• More forward looking assumptions

• IFRS requires valuation actuaries to change assumptions when there is sufficient evidence to do so. However, the business often requires pricing actuaries to more progressively accept forward looking assumptions. In addition, pricing actuaries need to take more granular views of the business (see next bullet point) than valuation actuaries and therefore need to adapt assumptions to more granular levels. When experience analysis is done by the valuation team business requirements are often overlooked, which creates issues for the pricing process.

• Pricing affects sales, lapse profiles and claims. These assumptions are arguably the most influential to new business pricing decision-making. They are also difficult to measure and, again, typically not included in experience analysis. These elasticities exist and have a significant impact on the company’s profitability as has been recently observed in Australia.

• More granular output / customer view

• Valuation models typically provide output at the Reporting Group Level (RPG) level. However, pricing actuaries require actuarial pricing models to provide significantly more granular output both segmented for different customer profiles as well as for customer profiles across products.

• In addition, more and more insurance companies are recognising that most customers do not need one product, but usually a combination of products to meet their needs. In fact, typically more than half of customers buy at least 2 products. These sets of products are what should be priced right for most customers. Not the products by themselves.

• New business parametersActuarial pricing models typically take last year’s new business as a starting point for next year’s sales. Based on elasticities new business volumes (and claim and lapse rates) are flexed up and down. The impact of price changes on claim and lapse rates have been observed in the industry, though often not well incorporated in pricing models because they are generally not used for valuation.

• ComplexityValuation models require substantial complexity to deal with the in-force portfolio, containing various closed books with product and policyholder characteristics not required for new business modelling. When used for pricing purposes, this complexity is both risky as well as slow for pricing actuaries to work with.

For all of the above differences in this fast changing environment, many companies struggle with the question of whether to have one model for both valuation and pricing or two sets of models.

Depending on whether this question is asked to finance or to pricing actuaries, the answer, understandably, swings one way or the other. Valuation actuaries draw comfort from pricing actuaries using the valuation model, because it makes it easier to reconcile pricing modelling with valuation. On the other hand, the ‘overhead’ that using valuation models presents to pricing actuaries is significant.

Another often heard argument is that having two sets of models is useful from a review point of view. Many agree that the best way to review an actuarial model is to use another, independently built, actuarial model.

Another factor relevant to this decision is the amount of change in the market. If market conditions are stable and pricing and product changes are minor, then differences in assumptions, including elasticity and new business parameters become less important.

October 2016Benchmarking Pricing10

Process Issue Impact

Product Development Process

Pricing process gets squeezed Longer pricing cycle or reduced profitability*

Not using segmented profitability for customer focus

Reduced profitability

Pricing Process

Competitive and actuarial analysis done separately

Longer pricing cycle or reduced profitability*

Not enough time to iterate to the optimal price

Reduced profitability

Other stakeholders don’t provide sufficient requirements up front as to what is acceptable as part of the pricing brief, ie pricing discussions with stakeholders are tactical not strategic

Suboptimal use of resources / longer pricing cycle or reduced profitability*

Actuarial review is often done very late Potentially additional IT expenses

Modelling changes introduced during the pricing process are not always fully reviewed due to time pressure and because they don’t know the ins and outs of the model

Additional modelling risk

Actuarial Modelling

Significant changes are required from the valuation model to be used for pricing

Operational inefficiency

Valuation model is significantly more complex than required for in-force business

Operational inefficiency and longer pricing cycle or reduced profitability*

Experience analysis done by valuation team and not meeting pricing requirements

Reduced profitability

Lacking impact of price elasticities, especially lapse and claim elasticities

Reduced profitability

Granular output Reduced profitability

* Because the pricing process is already under time pressure additional slow down will result in a less optimal price

Summary of Product Pricing Process Issues and Impact

October 2016Benchmarking Pricing11

Issues ImpactFinding the optimal price takes too long to iterate to optimal pricing

Longer pricing cycle or reduced profitability*

Not set up to provide segmented profitability reporting which prevents finding the optimal price

Reduced profitability

Separate systems for actuarial pricing and competitive analysis

Longer pricing cycle or reduced profitability*

* Because the pricing process is already under time pressure additional slow down will result in a less optimal price

Summary of Key Technology Issues and Impact

Combined Impact and RecommendationsIn summary, the above issues with current product pricing process negatively impact profitability, speed to market and operational efficiency.

The best ways to improve the performance of the pricing process are to:

1. Speed up the time it takes to find the optimal price2. Expand the pricing brief to a pricing strategy that contains all requirements and goals from all

stakeholder involved to enable pricing actuaries to find the optimal price quicker

The key question now is, how much is the impact? In collaboration with the industry we have developed the following estimates assuming that analysis could be speed up 10 to 20 times:

Issues ImpactProfitability 1% - 5% profit margin / VNOB

Speed to Market 1% - 5% revenue

Operational Efficiency 25% - 50% increased pricing capacity

Technology The current pricing process doesn’t deliver the best price. There’s just not enough time to iterate to the ideal solution with the current available software. Besides the issues that come along with using valuation models as a basis for pricing, this is mainly because the tools used for pricing – both for modelling and communication – are antiquated and not build for purpose.

Both usability as well as reporting capabilities have not kept up with time. It takes on average 1 to 2 days to make adjustments for pricing scenarios, check the results, do competitive analysis in a separate system and collate and analyse the results. This is inefficient use of a very valuable resource, pricing actuaries.

This is then made even more difficult because current systems don’t provide enough information out of the box to find the optimal price. It requires substantial effort to customise results that provide the insights required for the pricing process. As a result, most life insurers aren’t doing segmented pricing, ie optimising the price for segments of the product, eg 500-750k, 40 - 45 year old male non smokers. This is despite the fact that segmented pricing at a product or customer level will often add a few percentage points to the profit margins of a portfolio.

Having segmented information, for example, allows insurers to optimise cross subsidisation between small and unprofitable policies, and the larger valuable policies. Segmented pricing also means insurers can choose to add more emphasis to the customer segments that deliver the vast majority of value given price versus volume, lapse and claim elasticities.

October 2016Benchmarking Pricing12

There are two key trends that will put increasing pressure on the pricing process:

• The adoption of a customer view• Dynamic repricing

Below we will explore the potential impacts of these two trends on the pricing process.

Customer viewMany insurers are thinking about or working towards becoming customer focussed as a way to improve relationships with clients, and increase retention rates and profit margins. The increased focus on bundling discounts is a key example.

The industry, which has been focussed mostly on advisors for decades, is currently figuring out what that means and how to do it. One thing is for sure though, this shift is bound to increase the complexity of pricing, something that the current pricing processes and systems can almost certainly not handle within reasonable time frames and costs.

Pricing ProcessIt is not yet clear what a customer focused product (and services) set looks like. From a pricing perspective it will almost certainly increase the pricing complexity. Currently pricing is still mostly done on a product by product basis, with an increasing number of companies already taking into account product bundling discounts. They are also beginning to look at the competitive positioning of their most commonly sold product bundles.

In effect the pricing brief will likely become more complex:

• Products and product combinations should be priced appropriately for each segment.• There will likely be more customer segments and therefore product combinations to be priced

than currently there are products, increasing the amount of pricing to be done.• Pricing compromises between various bundles might be unavoidable if bundle discounts are

used to meet the pricing brief for each customer segment. Alternatively, more complex pricing structures might be required to meet pricing objectives for all customer segments.

Developing a ‘complete’ pricing strategy based on which the pricing actuaries can work out the optimal price, will be an accelerator to the pricing process. As mentioned before, this can be achieved by shifting the pricing conversation during the pricing process with stakeholders from a tactical level to a strategic level.

Actuarial ModellingAlthough requirements are still to be defined, ‘customer view modelling’ will create additional complexity in actuarial modelling.

Currently life insurance companies are modelling on a product basis (as effectively required by the accounting standards) and not at a customer level. Given that more than half of all customers buy more than one product and that customers with different products behave differently and have significantly different claims experience, an increased customer view will increase demands on actuarial modelling.

5. FUTURE REQUIREMENTS

October 2016Benchmarking Pricing13

Some examples:

• Modelling customer life events, e.g. likelihood of buy a house, getting married, having children and the impact on insurance needs (to enable modelling customer lifetime value). This will be instrumental to implementing customer lifetime strategies.

• Modelling customer based lapse rates. It is known that customers who have multiple products have lower lapse rates. Currently models do not make this distinction.

• Providing reporting by customer segment e.g. with different combinations of products.

• Modelling bundling discounts as the model doesn’t know how many products a customer has at a certain point in the future.

Taking a customer view will also have significant implications on the pricing process. First and foremost, because the pricing process will need to meet pricing requirements for different customer segments with different product combinations. This is significantly more complex than pricing at a product level.

TechnologyTechnology is a key enabler to adopt customer based pricing. The current most commonly used technology will make it very challenging to adopt customer based pricing. It likely won’t be able to meet business requirements regarding speed to market, as the amount pricing work could potentially significantly increase.

The customer process will require profitability and competitive position reporting at the customer level, which is more granular than at the product level and across product bundles. This raises a third concern that currently used technology is setup and architected to model on a product basis. Changing this to customer will be challenging and cumbersome at best.

Increased Rate of Repricing

The rate of repricing has been increasing consistently over the past three years. Various life insurance companies in Australasia are investing in their IT infrastructure to reduce costs and decrease the time it takes to put through pricing changes.

Being able to rapidly reprice provides, amongst others, the following benefits:

• Ability to adjust pricing to either steer revenue or profitability• Better understanding of market elasticity and therefore price more optimally• Ability to maintain preferred competitive positioning• Faster response to market opportunities such as changing elasticities

In some countries, repricing on a weekly basis is common practice. Of course, this does not provide sufficient time to go through a product pricing process as we know it. Generally, the approach taken is to sign off on pricing rules and ranges, which define a pricing response due to both internal and market changes.

October 2016Benchmarking Pricing14

The Pricing Maturity Model provides a scale on which an insurer’s pricing process can be measured. The first column outlines the bare minimum requirements for pricing to happen, albeit painful. The last column represents the best of the best; the type of pricing process that will be purely aspirational for the majority of insurers on the short to medium term.

By using this framework, life insurers can establish where they would like to be on the scale and which areas they’ll need to focus on in order to move to the next category. Based on our research, we believe the majority of insurers to be placed around the 2nd category and many of those aspire to move into the 3rd category.

In this model we assume that insurers would adopt the customer centric approach before the dynamic repricing approach. This is because most in the industry seem to prioritise taking a customer view, but some insurers do also prioritise adopting dynamic repricing.

Few or no players in the industry have yet adopted a customer view or dynamic repricing. Therefore, the listed requirements will likely change over time as the industry gains experience.

6. THE PRICING MATURITY MODEL

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view

rang

es

Peop

le

• Pr

icing

don

e by

tech

nica

l pr

oduc

t ana

lyst b

ased

on

com

petit

ive d

ata

rath

er th

an

actu

ary

• Ex

tern

al a

ppoi

nted

act

uary

wh

o's n

ot a

ctive

ly in

volve

d in

pr

icing

pro

cess

• Pr

oduc

t tea

m n

ot in

volve

d

• Pr

icing

don

e by

act

uarie

s•

Com

petit

ive p

ositi

onin

g an

alys

is fo

r sce

nario

s don

e by

pro

duct

team

• Ta

ctica

l pric

ing

disc

ussio

ns w

ith ke

y sta

keho

lder

s fro

m u

nder

writi

ng, p

rodu

ct, s

ales

and

mar

ketin

g

• Pr

icing

don

e by

act

uarie

s•

Com

petit

ive p

ositi

onin

g fo

r sce

nario

ana

lysed

by p

rodu

ct

team

• D

raft

prici

ng sc

enar

ios a

ctive

ly di

scus

sed

with

key s

take

hold

ers

from

und

erwr

iting

, cus

tom

er, s

ales

and

mar

ketin

g te

ams

• Sa

me

as c

usto

mer

cen

tric

with

the

follo

wing

ad

ditio

ns:

• D

ynam

ic pr

icing

rule

s des

igne

d se

t and

ex

ecut

ed b

y act

uaria

l tea

ms t

o op

timise

va

lue

when

cha

nges

occ

ur in

the

mar

ket

Proc

ess

• Pr

icing

pro

cess

pro

mpt

ed b

y m

arke

t pric

ing

chan

ges

• Si

mpl

e pr

oces

s, bu

t not

cle

arly

defin

ed•

Min

imal

leve

ls of

revie

w•

Hig

hly m

anua

l pro

cess

• Be

twee

n 2

to 4

wee

ks

• Pr

icing

pro

cess

par

t of a

nnua

l pro

duct

revie

w pr

oces

s•

Form

al re

view

proc

ess i

n pl

ace

inclu

ding

sign

off

by

appo

inte

d ac

tuar

y•

Itera

tive

proc

ess t

o go

al se

ek to

ward

s opt

imal

sc

enar

io•

Proc

ess o

ften

ende

d th

roug

h de

adlin

e ra

ther

than

ar

rivin

g at

opt

imum

• Si

lo-e

d co

mpe

titive

ana

lysis

and

actu

aria

l pric

ing

proc

ess

• Be

twee

n 2

and

5 m

onth

s

• Pr

icing

pro

cess

par

t of a

nnua

l offe

ring

revie

w pr

oces

s•

Form

al re

view

proc

ess i

n pl

ace

inclu

ding

sign

off

by

appo

inte

d ac

tuar

y•

Cus

tom

er ra

ther

than

pro

duct

act

uaria

l mod

ellin

g•

Shor

t ite

rativ

e pr

oces

s to

goal

seek

towa

rds o

ptim

al sc

enar

io

for e

ach

segm

ent f

ollo

wed

by re

finem

ent o

f stra

tegy

• C

lear

ly sp

ecifi

ed p

rice

to n

ew b

usin

ess,

laps

e an

d cla

im

elas

ticiti

es•

Mor

e pr

icing

ana

lysis

than

whe

n pr

oduc

t cen

tric

and

requ

ires

mor

e au

tom

atio

n to

com

plet

e in

tim

e •

All p

rodu

cts w

ill ne

ed to

be

repr

iced

as p

art o

f the

sam

e pr

oces

s•

Shou

ld n

ot ta

ke lo

nger

than

6 m

onth

s to

com

plet

e pr

oduc

t re

view

and

impl

emen

tatio

n wi

thin

the

year

• Re

quire

s sig

nific

antly

mor

e ef

ficie

nt p

ricin

g pr

oces

s com

pare

d to

pro

duct

cen

tric

• Sa

me

as c

usto

mer

cen

tric

with

the

follo

wing

ad

ditio

ns:

• Pr

icing

pro

cess

ext

ende

d fo

r a ra

nge

of

base

ass

umpt

ions

rega

rdin

g el

astic

ities

, vo

lum

es e

tc to

pro

duce

rang

es a

nd

ther

efor

e re

quire

s mor

e au

tom

atio

n co

mpa

red

to c

usto

mer

cent

ric•

Freq

uent

mar

ket m

onito

ring

of fa

ctor

s in

clude

d in

the

prici

ng c

hang

e su

ch a

s e.

g. d

eman

d, vo

lum

es, e

last

icitie

s

Tech

nolo

gy

• Ba

sic a

nd le

ast e

xpen

sive:

m

ostly

Exc

el a

nd o

ther

offi

ce

appl

icatio

ns to

com

mun

icate

pr

icing

• N

o en

d to

end

or i

nteg

rate

d pr

icing

tool

s•

Mos

tly E

xcel

and

act

uaria

l mod

ellin

g to

ols f

or

anal

ysis

• M

argi

n an

d va

lue

repo

rting

usu

ally

at th

e pr

oduc

t le

vel

• St

anda

rd o

ffice

app

licat

ions

for r

epor

ting

and

com

mun

icatio

n ot

herw

ise•

Vario

us d

ownl

oads

from

cor

e ad

min

syst

em fo

r ac

tuar

ial a

nalys

is•

Lega

cy a

nd in

flexib

le a

dmin

/ pr

ice re

posit

ory

• M

ore

auto

mat

ed p

ricin

g an

d co

mpe

titive

ana

lysis

syst

ems

• En

able

s hig

hly s

egm

ente

d (c

usto

mer

and

pro

duct

) act

uaria

l va

lue

and

mar

gin

repo

rting

• Va

rious

dow

nloa

ds fr

om c

ore

adm

in sy

stem

for a

ctua

rial

anal

ysis

• Le

gacy

and

infle

xible

adm

in /

price

repo

sitor

y

• Sa

me

as c

usto

mer

cen

tric

with

the

follo

wing

ad

ditio

n: d

irect

inte

grat

ion

back

offi

ce sy

stem

s wi

th fl

exib

le p

rice

repo

sitor

y

October 2016Benchmarking Pricing16

Once an insurer figures out where they fit on the scale, the easy part is over. Updating a long entrenched process is always going to be painful, but shying away from change can end up much worse. Any insurer that doesn’t strive to reach more optimal pricing will likely lack growth in the currently challenging environment of increased competition.

Insurers need to change their attitude towards pricing, and in fact many other processes they take for granted. Take a page out of the book of the world’s greatest innovators and see everything as an ever-evolving work in progress. Every process can be continuously enhanced to better meet business goals.

The good news is, for something with such a strong influence over business outcomes, pricing is an easy place to start. For example, by replacing the tools you use for pricing you can increase your speed to market, gain more in depth competitive analysis insights, and improve your team’s workflow without disrupting any other section of the business.

Take a look at where your company sits on the pricing maturity model, and make a decision about where you need to make adjustments first. After all, change is inevitable. You just need to make sure it’s change that benefits you.

REQUEST A CALL To request a call or to ask a question, go to http://montoux.com/contact-us. A Montoux representative will respond to your inquiry as soon as possible.