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A Roadmap to Better Pricing

BCG brings together traditional models with 21st century tools and analytics to help insurers build dynamic and disciplined pricing strategies.

BCG deftly bridges traditional pricing models with advanced techniques in big data analytics and client research to help insurers develop better pricing models and new customer propositions. In a fast-evolving industry, this comprehensive roadmap can very quickly bring a boost of 2% to 8% of an insurer’s top-line revenues. 

Our approach doesn’t simply update your pricing policy. It closely aligns with your firm’s overarching business strategy and goals, adjusts to changing consumer preferences and marketplace realities, and builds in pricing capabilities organizationwide to ensure adaptable and sustained success. 

Most critically, we enable your staff to effectively price your product portfolio and design new customer propositions. We work directly with your staff during the assessment and implementation phases to help them learn critical pricing skills, understand evolving pricing models and inputs, and understand changing customer expectations and willingness to pay. The end result is that your team is fully able to set the right pricing strategies in a changing market long after our consultation is completed. 

We do this using four sets of customized tools and building blocks:

  1. Enhanced Risk Differentiation. We work with you to develop a coherent strategy on risk and price differentiation. Working with your actuarial team, we also identify, test, and select new and better risk parameters derived from new sources of data about how customers behave, drive, or live. 
  2. Proposition and Churn Management. BCG helps insurers build a deep understanding of price sensitivity, competitive price sensitivity, and client willingness to pay. Using our Market Predictor Tool, we build tiered and bundled propositions and product lineups. We also develop an advanced repricing and churn approach with differentiated margins and develop customer life cycle value strategies to drive client retention, cross-selling, and improved value per client. 
  3. Product Innovation. We develop radically new customer propositions that base pricing on a much more granular, individual understanding of the risks involved. For example, a “pay as you drive” proposition would link premiums to such sensor-measured factors as the miles, time, and types of roads driven and driver acceleration and braking tendencies. “Pay as you live” would rely on wearable technology and Web applications to track a client’s exercise, sleep, and other daily habits. “Smart home” inputs would be obtained from, among other things, security and fire and water-leak detection systems. These pricing models provide insurers with more client touch points, while also giving clients specific information on safer, healthier ways to drive and live. Customers would benefit through greater control over their premium costs and reduce their risk of an accident, health crisis, theft, or home loss. (Want to build a transformational digital product? Find out how BCG Digital Ventures can help.)
  4. Price Realization Booster. BCG’s pricing experts develop more effective discounting structures and price management, which result in a reduction in discount leakage. We are also uniquely capable of improving sales force discounting through guidance, tooling, training, incentives, change management, and enablement.
  5. Pricing Capability Booster. Using our Pricing Maturity Assessment, we benchmark against sector competitors and conduct Web-based surveys and beliefs audits of clients to help determine key areas for pricing improvement. Based on this and other inputs, we help clients build a better pricing governance structure, including roles, responsibilities, and processes, to better manage pricing decisions. We also help insurers build a pricing team as well as long-term capabilities through recruitment, training, coaching, tool development, and other enablement initiatives.

We approach each project in a customized fashion, working closely across disciplines with senior management, actuarial teams, commercial functions, and finance, operations, and IT departments to link any new pricing solution to your firm’s overarching strategy and business goals. We also seek out the perspective of frontline employees and clients to accurately identify client behavior trends, decision-making rationale, and other key insights. 

Throughout this process, we put in place infrastructure, processes, and practices that will provide your company with the sharp managerial oversight and organizational change needed to translate business strategy into a disciplined, dynamic, and successful pricing strategy.

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