Ratemaking processes using legacy technology and methods are no longer adequate.
A recent McKinsey report, Insurance 2030—The impact of AI on the future of insurance, found that more technologically advanced market entrants have increased pressure on traditional insurance companies to innovate. Furthermore, the pandemic has increased the need for insurers to adopt solutions that enable them to meet consumer expectations for more affordable rates and for products that meet their needs, at the moment of need.
The answer is dynamic ratemaking, an advanced, AI-driven process that creates product offerings that respond to real-time market changes and align with consumers’ expectations as market conditions shift.
Delivering on Consumer Expectations With Agility
Traditionally, gathering data and building new insurance rate structures has taken several months, because traditional systems are slow to adapt and solutions that operate in a siloed manner rely on multiple approval processes.
Waiting six to 12 months to introduce new insurance products and rates is too long. Many insurers currently use real-time automated ratemaking and product deployment, and consumers are likely to go with those insurers that can provide the most personalized and competitive product offerings.
Personalization as a Competitive Advantage
Consider usage-based insurance (UBI). Some insurance customers now prefer to pay a rate based on their driving habits, as opposed to a one-size-fits-all rate, and dynamic solutions can calculate millions of rates and product options each day – in a personalized way.
A dynamic solution enables insurers to provide both traditional and UBI options by managing and automating the entire ratemaking process. Agile and sophisticated solutions propel data through the enterprise-wide ratemaking machine to deploy new rates quickly. Once filed and deployed, real-time quotes are provided to the right customer touchpoint.
See also: Pressure to Innovate Shifts Priorities
Iterative Deployment of a Dynamic Solution
A single, end-to-end solution that combines personalization, ratemaking and deployment capabilities doesn’t necessarily require a complex implementation. Capabilities can be implemented iteratively, enabling insurers to realize ROI faster and safeguard operations.
With increased technology adoption in the insurance industry, the market will become more competitive, and consumers' expectations heightened. Alternatives to traditional ratemaking methods can improve consumer retention and enable insurers to offer competitive options regardless of market conditions. With a dynamic rating solution that combines advanced and traditional statistical methods, insurers can create and deploy new rating structures attuned to market conditions and consumer needs.
