Insurance Pricing and Underwriting - where prediction meets the business

Massimo Cavadini

Pricing and underwriting have always been data-driven pursuits, but technology has allowed data to proliferate beyond anything the developers of the first actuarial tables could imagine. In the past two decades alone, the number of fields in an average policy database have grown from ten or fifteen – details like age, sum insured and region – to hundreds of variables today. Thanks to digitalization, we have at our disposal not only internal databases of policy and claims, but also external structured and unstructured data related to vehicles and buildings; geo-demographical and economic information and even weather, road and traffic data. On top of this, the recent development of cloud computing has made an unprecedented computational power available to many insurance players, boosting prediction to the next level.  


 That’s what makes partnering with Munich Re so valuable: we have the domain knowledge to help you understand the available data and the cutting-edge solutions to help you act on it. We leverage the full strength of our combined knowledge, resources and services to make state-of-the art analytics tools and insight available so you can enhance your pricing and underwriting process – turning the deluge of available data to your advantage.  

 The long-term partnerships that we form with primary insurers allow us to establish trust, bring the solutions in line with strategies, and share the risks, data and insights that demonstrate we have skin in the game. Munich Re is well known for reinsurance, and our clients expect us to be very good in that arena – as we are. What they don't expect is our team of pricing experts who operate from a primary insurance point of view.  

 We offer primary insurers sound pricing expertise coupled with advanced analytics techniques, including machine learning and AI, to allow you to transform a prediction into a business decision. We can help you set up technical and commercial price for new products, define the underwriting rules of the product structure and find the target client niche. We'll assist you with calibrating rates using behavioral modelling and competitive market analysis, optimizing the profitability or volume over a series of years.  

 Our expert team can help you use data to navigate a changing landscape. For example, we recently completed a two-year project for a client who needed greater pricing sophistication in the face of increasing competition driven by the aggregators channel. There is a need for all the main primary insurance players to adapt to this new disruptive approach. Our client understood the only way to win in a very competitive market was to increase its means of finding the niche of customers that are profitable. Therefore, they needed strong pricing expertise, coupled with advanced analytics, to identify profit- and loss-making customers. We ran around fifteen models on their data to predict the future cost of claims in conjunction with behavioral models to predict the customer’s price elasticity. We came up with a proposal for different scenarios to be implemented to improve overall profitability, and they ultimately put our recommendation in production – with favorable results. 

 Munich Re’s Data Analytics Solutions enhance performance and cut costs all along the value chain, including claims and sales as well as underwriting. Learn more from my colleagues, Markus Gützlaff, Senior Motor and Mobility Consultant at Munich Re, and Lorentz Haubner, Data Scientist from our customer analytics group.  

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