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Which part of the actuarial work is covered by the application?

The base component is the tariff tool, to develop the different models to get a predictive premium for the future claims costs. A second component is dedicated to the analysis of the customer behavior. We get elasticity and response graphs that show us, based on historic data, how clients react on our premium changes. This can be used to compare several premium scenarios in a realistic way including the impact on volumes. A third component can realize a large number of premium simulations. User can define several indicators and see the impact of premium changes on these indicators.

What is the advantage of using addactis® Pricing?

Our solution covers the entire pricing process. The application works with a powerful GLM engine to handle big data sets, but also includes the data preparation step and a reporting tool to have an all in one solution. It is a guided application that offers high flexibility. With addactis® Pricing, actuaries can dedicate their time on data analysis and prepare business decisions.

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My data has changed slightly, what can I do with my finished project?

If the data changes the models became invalided. But if we want to introduce a minor change (one more month for our study, an additional column previously not available) we can go back to the data import, update our data and go forward through all steps of the tariff development. All analyses and models are still there, user has only to update them. For mayor changes it is not recommended to use this feature, because in that can user should look for new models and not just update the existing ones.

Is it possible to work with several premiums at the same time?

addactis® Pricing offers a high flexibility to work with several premiums. In the consolidation part the user can define as many premiums he wants – using different models, different hypothesis for tendencies, inflation etc. and also different amounts for general costs. This way it can be defined one (or more) premium(s) to give our best estimate for the future claim costs and several commercial premiums, representing different scenarios, different strategies. In the impact analysis and reporting part the user can compare these premiums.

How can I use the data created inside addactis® Pricing to prepare my presentation to present the results of the project?

Once the project finished all information, graphics, tables, comments, models are in this project. At one side the project could be a flexible, interactive presentation. But sometimes it is necessary to use a standard presentation format. For that case all tables and graphs can be copied; graphs as an image or as a graph together with their data to Excel, tables to the clipboard.

Is it possible to create smooth geographical zones for my pricing?

Our solution has an integrated geo-spatial smoothing function. Based on the residuals of our “best” model there are offered several methods to define geographical zones with a similar behavior.

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Expertises

FOCUS ON PAYD

Let’s go further. Mobility trends are evolving and dozens of startups based on car, parking, or ride co-sharing are emerging. What position could the car insurance adopt regarding these new competitors and consumption modes?

Technology-driven trends will revolutionize how industry players respond to changing consumer behavior, develop partnerships, and drive transformational change. Insurance industry will need to change its mind as any other player in the market but with a key difference: the productive cycle is inversed in the insurance sector. That means that the industry will need to anticipate how these changes can impact the PL account before setting the risk premiums threshold. There are lots of models arising in a recurrent base to help insurers in transferring the implications of the changes in technology to insurance premiums in particular and dynamic solvency in general. Thus therefore until the effects of this fact are proved the industry wil have to dedicate part of their budgets to endow people and models with the technical departments.

Expertises

FOCUS ON PAYD

What is going on with Pay How Drive insurance? IoT adoption, good driving behaviour awareness…

PAYD motor policies are a new conepts of insurance contracts which has started to be commercialized in many countries, amongst others in Spain. Its main characteristic is that instead of having an annual premium being established, the premium is fixed according to the number of kilometers done by the car, besides other characteristics of the risk traditionally used in pricing. Therefore, those who use the car more are going to pay a higher premium because they are more exposed to the risk of accident.

Expertises

FOCUS ON PAYD

What does this evolution imply for the insurers’ customers relationship?

Upsell, advices, much more contact with customer through an app… Typically, insurers promise consumers that they’ll save anywhere from 20 to 50 percent; just how much depends on your insurer. Some insurers offer an immediate discount, usually 5 or 10 percent, for simply installing the device. From that standpoint and considering motor insurance directly dependent on price, we think this can reinforce relationships. However we have observed that some profiles are reluctant to provide insurers with personal data which can lead to a conflict in the case this policyholder is charged with a large amount due to his risk profile.There is no doubt that the future goes in this direction where Big Data has a relevant position.

Expertises

FOCUS ON PAYD

Let’s go even further. Autonomous cars are coming. A car without a driver = a car without an insurance? Does it mean that the car insurance market is coming to an end?

Self-driving cars are definitely on the way. Most accidents are caused by human error so if this factor can be minimized by taking control of the moving vehicle away from the driver, the accident rate should tumble. This fact will clearly affect the insurance sector: lower frequency rates combined with lower severity will drive to a decrease in the loss ratio of the industry. For us the key element here is to analyze the depth of these decreases. Recently Tesla was considered not guilty of the result of death of the driver of one of their self-driving cars after a long process in the court. There will be a need for liability coverage as the legal sector goes behind the technology, but the way of proceeding will necessarily need to change as manufacturers and suppliers and possibly even municipalities are called upon to take responsibility for what went wrong. We will contemplate the change on underwriting procedures, claim adjustment, claim settlement, repair cost and finally legal aspects. As we mentioned in the prior question the insurance industry will need to anticipate, assess and implement all the changes derived from the irruption of technology very soon if companies want to remain as a profitable market player.

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