Pricing agility in a GIPP world

pricing webinar write up may 2022

Ten years ago, agility wasn’t a word heard much in the context of insurance, let alone pricing. Prices themselves may have changed every 4 to 6 weeks – as part of a pre-planned strategy set in stone months in advance.

 

Today, prices are often changed daily, as brands compete to attract customers in fast-paced and fast-changing marketplace.

 

But does the FCA’s crackdown on offering its cheapest prices to new customers and its new ‘fair value’ requirements mean pricing agility has become irrelevant?

 

In short, no. It might actually make it more relevant…

 

Here’s some of the key points to take away from our recent panel discussion about what pricing looks like in a General Insurance Pricing Practices (GIPP) world.

 

  1. There is still a need for pricing agility

 

While general insurance customers are still price sensitive, price agility will have to remain a key part of the strategy of any provider.

 

We’re currently seeing new business slow and retention increase for many brands, and that’s creating new challenges for brands in managing volume and prices.

 

Pricing has always been one the easiest levers to pull to control customer acquisition. Having fine motor control on that is especially important in a volatile and fractured landscape that has been impacted not just by regulation, but by new technology and new market entrants, not to mention a global pandemic, looming recession, and rising inflation.

 

Change really is the only constant, and when the world you saw last week just isn’t the same as the one you see this week, agility is essential. Demand and supply are constantly fluctuating – and brands need to be ready and able to move with both.

 

The shorter the gap between sensing where a change might be needed and responding to it, the more likely a provider is to be able to target the right customers and the right risks for them, at the right time, with the right price.

 

  1. Data is king

 

Data is essential to pricing agility, and it has to come from more than one source. Brands need a wide view of all the different inputs that might inform their strategy, and should be looking at their own insights, market information, competitor performance, customer behaviour and external data sources – and triangulating the information to make pricing decisions.

 

But data alone isn’t enough. Some of the main barriers to good data science are out-dated tech systems, clunky approval processes – and a lack of analysts to compile, analyse and interpret data sources. Being able to answer not just what’s happened, but why it’s happened, is critical.

 

 

  1. Pricing is only part of the value equation

 

The Holy Trinity for an insurance product is price, brand and product. Price is the fastest way to create ‘value’ – but also the crudest, and it may not be the most important for all products. Part of what GIPP has done is to go some way in levelling the playing field on price – and that leaves the field open for more competition on the other two components.

 

Value agility is now increasingly important, and we’re already seeing the market respond to GIPP in this way with new products and product tiers.

 

It’s worth noting that PCWs continue to base their results on price, but there is opportunity for one to differentiate its services by creating a VCW (value comparison website) – which could change up the game all over again.

 

  1. Your strategy might not look like everyone else’s

 

The ultimate goal for an insurance provider is to create profitable revenue, and it is now a regulatory necessity to do so by creating products and services that meet different and evolving customer needs and provide fair value. But strategies to do so will vary widely.

 

It’s incredibly important to be abreast of what competitors are doing, but providers will need to follow their own strategy rather than follow the crowd as prices move up and down in the market.

 

  1. The future is all to play for

 

While it would be great to have crystal ball to see into the future of pricing and value, it is impossible to predict. In the past, pricing teams would know what a price reduction might do to sales volumes with relative accuracy, and their acquisition and retention pricing models would be unrelated. Now it’s a much more complex and turbulent equation.

 

The closest anyone can get to it is in getting to know their customers, their competitors, the market, and the wider environment – and being ready to MOVE when they need to.

 

You can listen to the full discussion in our ‘Pricing agility in a GIPP world’ webinar, or download our whitepaper for more in-depth analysis.

 


 

Download our pricing agility whitepaper_EI banner

Whitepaper: Pricing agility in general insurance

Today’s general insurance market is a picture of change, uncertainty, and volatility. Insurance providers that are unprepared, will find it hard to compete. We want to help you navigate it.

 

That’s why we’re delighted to share our latest whitepaper, designed to help you understand the full picture of pricing agility, the current market landscape, and much more.

DOWNLOAD THE WHITEPAPER

 

Source: www.consumerintelligence.com

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