In response to the interest in the Radar Live component of the Towers Watson Radar pricing decision software platform, Towers Watson believe the interest is the foretaste of a significant shift towards real-time pricing updates in both the P&C and life markets.
“We see clear trends in the increasing sophistication of pricing approaches adopted by both P&C and life insurers,” says Duncan Anderson, a managing director at Towers Watson. “Insurers are continually enhancing their understanding both of risk and of customer purchasing behaviours, through enhanced modelling approaches and the wider use of data, including so called Big Data.”
He added: “But on top of this, we see an increasing desire for agility and speed to market. Even in insurance companies with advanced pricing models, actual implementation of pricing decisions can be subject to costly IT processes and delays, often with simplifications in the algorithms having to be made. In many markets this creates a pricing decision ‘lag’ and the process is also exposed to the possibility of human error along the way.”
Real-time pricing, of the type available in Radar Live, relies on capturing all of the underlying pricing and underwriting rules, including supporting models such as geographic or mortality analyses, to create highly sophisticated pricing algorithms. Within a single integrated analytical and operating environment these are then transferred to a calculation engine, almost instantly after changes in pricing policy have been decided. In markets where regulations permit, prices generated by Radar Live can also be fully optimised for individual customers.
Both P&C and life insurers are responding positively to the benefits of making this leap in pricing capability, according to the company. For example, Duncan Anderson said that in the intensely competitive UK P&C personal lines market, companies underwriting over 40% of FCA-regulated motor insurance have already licensed Radar Live.
While speed-to-market has been the primary focus of many Radar Live projects to date, improving the ease of use and scalability of both internal and external data, reducing costs, and allowing better audit and governance controls, have also been important operational considerations.
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