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Property level pricing

Forward Focus - October 2011

Author: Adam Follington and Les Coleman

Deloitte’s Analytics team

In the increasingly competitive and commoditised insurance market, getting the pricing right is key in staying one step ahead of your competitors. Customers are known to shop around for the best price. Our analytics team here at Deloitte has recently helped several insurers with their pricing models and customer data analytics.

Property level pricing

One of our clients in Australia wanted to move from zone to property level pricing capability for its home and motor insurance products. Deloitte Analytics developed a unique geo-coding capability that enabled a robust matching of addresses to geographical locations with confidence ratings.

We then built range algorithms to generate the national datasets on measures such as proximity to natural risks, transport infrastructure and “points of interest” that may be linked to social risk, as well as small area weather estimates.

This was used to enrich our clients’ input data for actuarial modelling to support testing of hypotheses on the causes claimed across a range of perils.

By drilling down to the granular level and pricing the policies based on the individual risk levels of a customer, our client experienced significantly less claims losses compared to some of its competitors following the catastrophic flood and bushfire events. This solution also offers the client the potential to reduce reinsurance costs as they can now accurately price risk at low levels of geography (e.g. individual property level), and therefore make more intelligent decisions on pricing and level of risk exposure. Another competitive advantage from this work is that the insurer is able to target and acquire the customers that are more profitable without conceding on their overall market share.

For more information on this project or other analytics issues, please contact your usual Deloitte advisor or any of our data analytics team.

Les Coleman: Sydney
Account Director -
Forensic
Tel: +61 (0) 2 9322 3402
lescoleman@deloitte.co.au

Adam Follington
Actuarial Services
+64 (0) 9 303 0931
afollington@deloitte.co.nz

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