Price optimization, the process by which an optimal premium is determined for each risk insured, has received a lot of attention over the past several years. However, for insurance companies considering this approach, defining exactly what this means practically can raise may questions. What exactly am I optimizing? Profit? Growth? Both? What do I do in cases where the optimal premium is substantially different that what I really can charge? How will an approach like this impact other areas of the company?
In price optimization, the focus, by definition is on price. However, focusing on price unnecessarily narrows the lens to the exclusion of a number of inputs to the process as well as potential applications of the results. Insurers can address these issues by changing the focus of these types of analyses to focus not solely on price, but on customer value.
This session will discuss the following aspects of customer value analysis.
1. Discuss the components of customer value, including profitability, and the probability of attracting, converting and renewing a risk.
2. Discuss how competition affects the ability to write and retain risks.
3. Discuss how to quantify the elasticity of demand using the company’s own renewal and conversion information supplemented by public information.
4. Highlight the differences between decisions made using traditional pricing, price optimization, and long-term customer value approaches.
5. Discuss applications of customer value analyses to marketing, underwriting, pricing, customer service, and claims.
6. Discuss the practical considerations of implementing customer value concepts.


Moderators:
Roosevelt Mosley, Pinnacle Actuarial Resources, Inc.

Panelists:
Roosevelt Mosley, Pinnacle Actuarial Resources, Inc.