Forward-thinking Insurers demand Dynamic Pricing
Consumers have made it clear that they expect faster, more personalized insurance policies from their carriers. This is not a one-off demand but rather an ongoing trend that insurers will have to face continuously, both now and in the coming future. The reality facing insurers is that rating mechanisms driven by legacy software are no longer adequate.
Innovative technologies that include new data and analytics capabilities are piling the pressure on traditional insurance businesses by introducing them to the industry's evolving demands. Investing in these new technologies opens a whole new world of opportunities that drive value and improve operational agility – with customer and process efficiency being at the centre of an insurer's business models.
Gone are the days where tariffs and fees are only updated once or twice a year. New technologies are now fast, agile and dynamic, enabling insurers to collect data and incorporate it into their risk modelling – on a daily basis. By utilizing the resulting timely feedback, they can adapt their prices at near real-time speeds. The market does not just want dynamic pricing, but also needs it. Those who have it, have the advantage.
Dynamic pricing enables insurers to respond and act upon real-time market changes, in alignment with consumers’ expectations. With the right technology and capabilities, insurers are able to deploy prices quickly and in a way that reflects those expectations, together with changes in the market.
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Traditionally, the process from gathering data to deploying rates takes several months. This is partly due to the fact that legacy systems are slow to adapt. Those changes are reflected slowly in the market and are therefore inefficiently delivered to consumers. Moreover, solutions that operate in a siloed manner and rely on multiple approval processes to execute rates are both time-consuming and antiquated.
It's not only consumers that are demanding more dynamic capabilities, but so are agents and brokers. Nowadays, they have the power to take advantage of AI and machine learning capabilities, enabling them to react faster than ever before to the ever-changing consumer demands. Before, such changes may have been an issue due to their complexities, but now it's clear that technology is being built to work for brokers and agents, making their lives easier.
Consumers with financial constraints and changing circumstances require timely offers. A couple of months or even a full year is too long to wait for the right insurance. If met with outdated rates based on old data, that being any data that is not the most current and not near real-time, consumers are likely to go with a different insurer that can provide the best option the market can offer.
Alternatives to traditional pricing methods can improve consumer retention and enable insurers to offer competitive options. With a single, wrap-around system that utilizes dynamic pricing models, insurance companies can determine and deploy rates in real-time.
Today’s sophisticated platforms can leverage decision-making tools such as “what-if” scenarios – all in a smarter, faster, and safer way. Such tools enable insurers to simulate data-driven pricing scenarios that predict pricing outcomes with the highest chances of success. When millions of rates and product options can be calculated each day, scaling with ease becomes the new reality – thanks to analytics-driven solutions.
The Power of Dynamic Pricing
Although some insurance companies may be concerned with the time, cost, and resources needed to implement a dynamic pricing system, the reality is that these solutions are often more cost-effective compared to legacy systems, especially in the long-term. Single, end-to-end insurance platforms that combine iterative deployment with ratemaking and execution capabilities allow insurers to realize value almost immediately. More so, having a real-time response to changes in consumer preferences while ensuring compliance and governance over the entire ratemaking process, gives insurers a competitive advantage, even during the most challenging market conditions.
The ability to personalize product offerings is a key differentiator when evaluating advanced systems that truly deliver on consumer expectations. Let's take the example of usage-based insurance (UBI), which has risen in demand over the last year. Consumer needs and behaviours have changed, and some insurance customers now prefer to pay for insurance based on their driving habits instead of paying for a one-size-fits-all generic rate. Dynamic UBI solutions can manage and analyse vast amounts of telematics data, thus operationalizing it as part of the pricing process. Now, highly personalized policies can be offered to consumers in a smarter, faster and safer manner.
With increased technology adoption and digitalization in the insurance industry, the market will become more competitive, and consumers' expectations further heightened. However, the best defense against rapid sector-wide changes is to get on the offensive, find the best technology solution that is compatible with enterprise-wide systems and implement an advanced dynamic pricing software. Doing so empowers insurers to increase customer satisfaction and retention and meet their business objectives.
Reach out to us if you’d like to find out how we can support your transition to dynamic pricing or visit Earnix’ webpage to find out more about their tool & capabilities.