Actuarial Strategies for Insurance Product Development

Set the stage for success with an efficient insurance pricing strategy

Every new insurance product begins as a concept, but transforming that concept into a market-ready offering requires meticulous planning. Insurance product development is the foundation of a product’s success in the long run. 

The pre-launch phase demands clear answers to critical questions:

• Who is your target audience, and what factors will make this product compelling to them?
• What level of risk are you comfortable with, and what exceeds your limits?
• How should policy terms – such as exclusions, limits, and deductibles – be structured?

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These decisions establish a scope and ensure alignment across underwriting, pricing, marketing, and product development teams. By defining the product’s purpose and target market, you can position yourself to make informed and confident decisions in the later stages of development.

Focus on actuarial data, even when you don’t have any

New products seldom come with the advantage of extensive historical insurance data. There may be no claims history to analyze or conversion rates to measure. Nevertheless, external insurance data sources provide valuable insights to fill these gaps.

Consider the following options:

• Filed rates and/or competitor data: depending on the territory you are operating in, competitors’ rating plans may be publicly available. Alternatively it may be possible to build a dataset of competitor prices via making dummy quotes. This data will offer critical insights into the market.
• Aggregator platforms: price comparison websites may be willing to share aggregated data on recent quotes. This will help you understand both the risks that are being quoted for in the market, as well as information on competitor pricing.
• Government and other public data: datasets such as crime statistics, census data, and geographic risk indicators can enrich your dataset.
• Non-traditional sources: resources like satellite imagery, credit reports, and open-source map data can offer additional insights.

By leveraging these resources with Akur8’s DATA module, you can establish a data-driven foundation for insurance pricing and underwriting strategies, even in the absence of internal actuarial data.

Prioritize iteration over perfection in your actuarial models

Insurance pricing is inherently dynamic, particularly during the initial stages of a new insurance product’s lifecycle. Developing a robust pricing strategy requires continuous refinement of three key components:

• Segmentation defines relative prices based on the key pricing factors of each risk profile. Reverse-engineering competitor pricing models or examining similar rate filings can provide a useful starting point. 
• Calibration sets baseline pricing levels that align with business objectives while accounting for claims costs, commissions, and planned discounts. Stress-testing all involved assumptions is crucial to ensure long term success. 
• Competitive intelligence and insurance market analysis can help identify underpriced risks and refine market positioning. Consider benchmarking your rates against competitors regularly.

This iterative approach ensures that pricing models remain flexible and responsive to market conditions while adhering to your insurance pricing strategy. 

Akur8 can help you build a flexible and efficient pricing process. While Akur8’s RISK module supports sophisticated segmentation and calibration processions, Akur8’s RATE module enables forecasting and stress testing of rating structures across a range of assumptions.

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Combine collaboration and technology for flawless execution

Insurance product development is inherently collaborative. It requires alignment across all functions, including pricing, underwriting, marketing and product development. A cohesive, cross-functional approach ensures that every component supports the product’s broader objectives.

However, successful collaboration must be paired with the right technology. Advanced actuarial tools, such as Akur8 Pricing, enhance efficiency and precision, leveraging machine learning and automation to refine pricing strategies faster and more accurately than traditional methods. This combination of speed and accuracy facilitates innovation without sacrificing reliability.

Buckle up for the launch! This will be a long journey

Insurance product development is both a technical and strategic challenge. Success depends on careful preparation, rigorous planning, and the ability to adapt to evolving insurance market dynamics. Insurers that use their actuarial data intelligently, refine their pricing models iteratively, and foster robust collaboration are well-positioned to compete effectively.

While thorough pre-launch preparation is key, it is just the beginning. Continuous post-launch monitoring throughout the product's evolution is essential to ensure it matures successfully.

By focusing on careful preparation and execution, you can ensure your offering resonates with customers and contributes to sustainable growth.

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Want to learn more about best practices for refining the pricing of a new product?