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Pricing and Underwriting

In a perpetually changing society, the concept of new tailored products is a fundamental step. Sia Partners supports its clients in this development step and leverages for them the benefits of the Consulting 4.0 ecosystem.

In today's competitive environment, pricing strategy remains a key component in the viability and profitability of Health and Protection insurance products. Sia Partners supports you in the different phases of the pricing process:

• Design and validation of pricing tools in Health, Protection, Long Term Care

• Support in innovation and the development of new product features

• Development of demographic assumptions adapted to client portfolio

• Segmentation and analysis of client portfolio for commercial targeting

• Recommendations on market trends

• Optimization of profitability: evaluation of risk transfer tools such as reinsurance

• Integration of underwriting work for comprehensive risk management when taking on new liabilities (audit committee, actuarial function report, etc.) and in the decision-making process

Sia Partners' expertise covers all of the actuarial pricing models applied in the market and offers alternative approaches to meet the specific needs of providers and current trends. The selection of the models used is an essential step because they must adapt to the internal environment of the firm but also be consistent with the objectives sought. Several models are used today:

 

Traditional models:

These types of models are easily interpretable. These models have a simple structure and a limited number of coefficients (linear regression, GLM, CART, ...).

However, their simplicity of use comes at the expense of their performance and can show their limits depending on the objectives.

Complex models:

These models, often called black boxes, are becoming more and more prominent because of their efficiency, in particular their predictive power. However, they also have disadvantages because they can be difficult to understand or use.

Sia Partners provides support to its clients in the choice of models and their implementation. Our firm can also help with the development of alternative methods by the use of traditional models enhanced via additional analyzes (based on machine learning) to optimize the modeling performance while maintaining the following criteria:

• Representativeness and relevance: refine modeling and understanding of portfolio risk.

• Transparency and auditability: understand and explain the modeled risk, how the model works, and the results obtained.

• Adaptability: adapt the model to economic, regulatory, and technological developments that have an impact on the behavior of policyholders and the modelled liabilities.

 

Use case: Optimization of the pricing process

Pricing needs to adapt to the internal and external environment of the insurance company, and in this time of constant change, many players have initiated price optimization projects. Here is our three-step approach: