Insurers must effectively adapt to new technological, market, and consumer complexities with better, more dynamic pricing if they want to maintain competitive advantage in the insurance industry. Here’s why:
Insurers that do not recognize these factors and fail to pursue and adopt new pricing models will end up playing a guessing game, which will further diminish their pricing capabilities. Those insurers will quickly lose competitive edge to rivals that better understand what is driving their clients’ needs and willingness to pay—and as such are able to design more attractive propositions at lower prices or at higher margin at the same prices.
Further, those insurers who continue to rely solely on a traditional actuarial model with a cost-based perspective and a limited set of risk differentiators will eventually end up with a larger pool of relatively riskier and less profitable clients. This will negatively impact profitability and, ultimately, market share.