Consumers have made it clear that they expect faster, more personalized insurance options.
The reality facing insurers is that rating mechanisms driven by legacy software are no longer adequate. According to a 2020 EY report about insurance trends in Germany, new market entrants contributing to the growth of insurtech in Germany have increased pressure on traditional insurance business models to invest in new technologies. However, the technologies that insurers choose need to be advanced enough to enable them to move and adjust as quickly as consumers’ expectations.
To meet the demand for dynamic pricing, insurers must turn to systems that can respond and act upon changes in the market in real-time and in alignment with consumers’ expectations, which remains a major challenge. With the right technology, insurers can deploy personalized prices quickly and in a way that reflects those expectations and changes in the market.
Delivering on Consumer Expectations
Traditionally, the process from gathering data to deploying rates has taken several months. This is in part because it can take up to a year for legacy systems to adapt to the changes in the market and reflect those changes in the rates delivered to consumers. Moreover, solutions that operate in a siloed manner and rely on multiple approval processes to execute rates are both time-consuming and antiquated.
For consumers with financial constraints and major life changes, one year is too long to wait for the right insurance. If met with outdated rates based on old data, which is any data that is not updated and used in real-time, consumers are likely to go with an insurer that can provide the best personalized option the market can offer.
However, there are alternatives to traditional pricing methods that can improve consumer retention and enable insurers to offer competitive options. With a single, wrap-around system that utilizes dynamic pricing models, insurance companies can determine and deploy rates in real-time.
In an effective pricing system, advanced analytical methods are deployed to respond in real-time to changes in market trends and consumer demand. These dynamic platforms can also leverage decision-making tools such as “what-if” scenarios – all in a way that is smarter, faster and safer. Analytics-driven solutions can adapt, scale and deliver while calculating millions of rates and product options each day.
The Power of Dynamic Pricing
Although some insurance companies may be concerned with the time, cost, and resources needed to implement a dynamic pricing system, the reality is that these solutions are more cost-effective compared to legacy systems. Single, end-to-end insurance platforms that combine iterative deployment with ratemaking and execution capabilities allow insurers to realize value almost immediately. More so, having a real-time response to changes in consumer preferences while assuring compliance and governance over the entire ratemaking process gives insurers a competitive advantage, even during the most challenging market conditions.
With increased technology adoption and digitalization in the insurance industry, the market will become more competitive, and consumers’ expectations further heightened. However, the best defense against rapid sector-wide changes is to get on the offensive, find the best technology solution that is compatible with enterprise-wide systems and implement an advanced dynamic pricing software. Doing so empowers insurers to increase customer satisfaction and retention and meet their business objectives.