SOLVENCY II
BRINGING IT FORWARDS TRANSFORMING PRICING TO A STRATEGIC PRIORITY Optimising the pricing process enables insurers to be more competitive - and this won’t change
A survey of UK life insurance pricing teams conducted by PwC UK and Montoux reveals the degree to which life insurer pricing functions have evolved and grown over the past several years. The survey highlights where certain insurers have made strong commitments to improving the pricing process, strengthening digital capabilities and integrating market data which has transformed pricing from a back-office function to a key growth lever.
With all the survey respondents confirming that they use competitor analysis as a key input in the pricing process, market insight is clearly a major influencer of pricing. But there’s more to pricing insurance products than merely being more competitive. Pricing with robust processes that are efficient and repeatable is also important, with faster repricing pointing towards a greater investment in tooling, processes and rate deployment capability.
Making the pricing process work for customers and insurers Over 80 percent of survey participants indicated they have a clear pricing strategy which is aligned to the objectives of business and have regular monitoring in place. While individual firms may be looking to differentiate themselves in areas such as product design, or customer service, the strong majority indicates UK life insurers understand the importance of pricing as a strategic lever for growth. With the focus on pricing as a strategic lever, it is unsurprising to see the high level sophistication of the pricing process within UK life insurers. Nearly half of all survey participants are repricing on an impressive 1-4 week cycle, making price agility a significant contributor to competitiveness and market performance. It also means those life insurers that are operating on longer timelines, months rather than weeks may well find themselves outmaneuvered on price by their competitors.
There is a significant spectrum in the number of pricing scenarios considered as part of a pricing exercise- half consider fewer than five scenarios but some considering more than 50. This reflects the variations in pricing strategy, the ease with which scenarios can be produced and analysed and the methodologies underlying them. More than three quarters of respondents use price optimisation in some form, but fewer than 20 percent feel their optimisation capability was mature and embedded in the process. Increasing pricing intelligence can be a lever to unlocking areas of growth within the portfolio. Room for growth in the pricing function Over 50% of participants identified resources as the biggest barrier preventing more frequent and agile pricing. However, only half of these respondents said
page 18
