Founding Partner
Anyone who has ever been involved in General Insurance Pricing knows that the value created by price optimisation or ‘market pricing’ was generated largely by treating renewals and new business differently. Yet, when the rules were changed to outlaw this, many of these same people decided that rather than admit the game was up, the answer was to double down on complexity.
Similarly, anyone who has been around a few years knows that the benefits of new business price optimisation, if any, are dwarfed by the losses caused by underestimating inflation or assuming a one-off reduction in frequency will continue.
Yet, if you read the commentary from any one of a number of insurers, you will see that- for all their investment in data, machine learning and AI- they got caught out by the entirely predictable impact of inflation increases due to Brexit, supply chain issues, post pandemic effects and a war in Ukraine.
The fact remains the primary job of insurance pricing people is not to come up with fancy ‘behavioural economics’ algorithms but to predict what the cost of the claims is going to be, and to deploy that in a way that is in line with the rules.
