By Matthew Tomlinson / Co-Founder, Nuon AI
Effective pricing strategy is critical to delivering insurance product growth and profitability in an industry that is becoming increasingly competitive.
Insurance aggregator platforms have contributed to the commodification of personal lines insurance and enabled an explosion of new market entrants to emerge – bringing an increasing number of competitors to track. Large brands with deep pockets can afford to list multiple products in a single category, producing results pages where many of the quotes are all from, effectively, the same provider.
With costs at the forefront of consumers’ decision-making process, there is a need for insurers to remain competitive and agile in their pricing strategy. This becomes ever more complex and challenging when competitors choose to match and mirror your pricing.
So how can an insurer outpace competitors and improve operational efficiency in pricing decisions? In this blog, Nuon AI co-founder and strategy specialist Matthew Tomlinson takes a deep dive into three approaches.
STRATEGY 1: Tap into new technologies to automate insurance product pricing
AI and machine learning are powering a rapidly-growing wave of new insurance technology. These tools enable you to react to market changes with greater speed and accuracy than can be achieved through human intervention.
Nuon AI’s Price Adjust software is an example of this kind of tech. While competitors may push price changes through systems and rounds of review that take days or even weeks, insurers using Nuon AI make price adjustments in real-time to react to market conditions.
The AI automatically makes discreet pricing adjustments, lowering pricing where necessary to gain business, and raising where possible to maximise underwriting profit. This puts your insurance product in a league of its own, rising above the messy middle of competitors mirroring one another to scrap for new business.
AI-powered pricing and underwriting teams are released from the minutiae of day-to-day pricing decisions to focus on longer-term growth and innovation strategies.
For further reading, download my white paper An Insurer’s Guide: How to win on insurance aggregator platforms with AI-powered real-time market pricing technology
Strategy 2: Simulate market conditions to make smarter pricing decisions
Not ready to move to a real-time pricing setup yet? Nuon AI’s technology can also be used to unlock powerful market insights and as a test bed for new pricing strategies.
Once connected to Nuon AI, pricing and underwriting teams can experiment with price and factor adjustments to understand the impact the changes would have if implemented fully in the product’s rating engine.
The software can run multiple experiments concurrently on live quote data against a range of possible scenarios, delivering a breakdown of how many policies are likely to sell in relation to each adjustment, and how much the overall premium is affected.
This data-led, informed approach provides a level of sophistication to pricing that remains out of reach for analogue competitors. It ensures that pricing decisions are tailored to your insurance product’s specific strategy, and means you can pivot pricing with confidence in line with market conditions.
Is Nuon AI right for your insurance product? Read our guide to real-time pricing AI.
STRATEGY 3: BUILD CUSTOMER LOYALTY THROUGH QUALITY SERVICE
While price remains a major consideration for consumers, service can make or break the sale. Offering a positive customer experience can reduce dependency on lower price points to drive conversion, and help avoid a race to the bottom in the quest to outmanoeuvre competitors.
The insurance industry has a long way to go to catch up with the sophistication and speed that consumers now demand, thanks to archaic processes and legacy systems. By investing in customer experience and providing a fuss-free service, insurers can differentiate from competitors, build loyalty and increase retention.
Review the full customer journey and past customer feedback to identify areas for improvement. I’d recommend using a tool called Miro to collaborate across your business to map out the end-to-end customer journey, and identify where friction points arise. Often, there are fundamentals that require relatively small changes to make a big impact on the customer experience. Consider:
- Is customer-facing communication written in Plain English, avoiding jargon and technical language that can confuse the reader?
- Is the website and/or mobile app customers use to purchase and manage their policies user-friendly and suitable for your target demographic?
- Are multiple channels for communication available, to suit the customer’s preference?
- Do support staff communicate empathetically and swiftly, to resolve issues when they do arise?