{ "docId": "019dd923-5ca1-7489-b634-a2709765f07b", "docSlug": "62c9b2539bf1585b", "documentTitle": "Whats Next Insurance Pricing", "authorId": "BCG", "authorName": "BCG", "documentKindSlug": "consulting-deck", "documentKindLabel": "Consulting deck", "sourceTypeSlug": "strategy_consulting", "sourceTypeLabel": "Strategy consulting", "presentationDate": null, "orientation": "portrait", "aspectRatio": 0.773, "pageNumber": 8, "pageCount": 13, "prevPage": 7, "nextPage": 9, "slideType": "key_messages", "function": "frame_problem", "density": "dense", "nDataPoints": 0, "notes": null, "elementsJson": [ "paragraph" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-5ca1-7489-b634-a2709765f07b/8", "deckHref": "/decks/019dd923-5ca1-7489-b634-a2709765f07b", "deckJsonHref": "/decks/019dd923-5ca1-7489-b634-a2709765f07b.json", "deckAnchorHref": "/decks/019dd923-5ca1-7489-b634-a2709765f07b#slide-8", "components": [ { "bbox": null, "kind": "callout", "text": "There is no bad risk, only bad pricing.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd951-acb8-762a-a73e-37f1ee261c8a", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.25, "w": 0.86, "x": 0.07, "y": 0.07 }, "kind": "paragraph", "text": "Insurers have been looking to expand use cases into other lines of business, with some even referring to “home telematics” programs. However, while telematics can tell us a lot about a driver’s likelihood to get into an accident, connected home devices do not necessarily help us understand if an insured is more likely to start a kitchen fire or overflow their bathtub. Instead, connected home devices focus on loss prevention and mitigation. Home security devices can decrease the likelihood of theft, while leak detection and water shutoff devices can decrease the severity of non-weather-related water loss. Insurers can offer risk mitigation discounts for these kinds of devices. Beyond in-home devices, insurers are increasingly looking to incorporate third party data metrics into underwriting guidelines and rate manuals. Some of these metrics, such as FireLine® and roof score, can be especially helpful as actuaries strive to adjust prices for climate change.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "3d7d7b8c-1750-4a33-8b5f-a0c14e53daf1", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.86, "x": 0.07, "y": 0.81 }, "kind": "paragraph", "text": "The use of AI/ML in pricing has raised questions of algorithmic bias, as “black box” models may inadvertently result in unfair pricing discrimination. Insurers and regulators need to proactively develop and apply Responsible AI standards to respond to these concerns and ensure that advances in pricing sophistication do not lead to unintended consequences. Insurers have long strived to set rates that are “not excessive, inadequate, or unfairly discriminatory.” Pricing actuaries continually assess new and existing rating variables", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "5ea20772-7bba-47a1-96e5-4cfb29076082", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.35, "w": 0.86, "x": 0.07, "y": 0.41 }, "kind": "paragraph", "text": "Improving pricing accuracy to match changing risk is a fundamental goal within insurance. “There is no bad risk, only bad pricing” has been an adage in the industry, meaning that any asset is insurable at the right level of premium. However, losses from natural catastrophes have been increasing in recent decades, pushing “CAT loads” higher and leaving less margin available for attritional losses. While industry catastrophe models may be able to extrapolate future losses better than standard actuarial analyses, they are ultimately still limited by the relevance of historical data compared to the changing climate, thus exposing insurers to an additional level of uncertainty. In this environment, some risks (for example a coastal property in Florida) are now being deemed so likely to sustain a total loss that the required premium to insure them is either prohibitively expensive or disallowed by regulators. One might argue, in fact, that “there is no good price for a bad risk.” Pricing alone is insufficient for a robust catastrophe management program. Insurers must develop and continuously maintain complementary underwriting guidelines and actively manage aggregations. Having a robust capital management framework is a crucial step for modern insurers to allocate capital appropriately and incorporate capital costs into policy pricing.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ed16ec76-cf0b-4983-a4ba-b8fe9cff9407", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.45, "x": 0.07, "y": 0.31 }, "kind": "title", "text": "What are the key challenges to overcome?", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9cfac3e3-8486-4ded-959b-facaaeccfa05", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.45, "x": 0.07, "y": 0.37 }, "kind": "title", "text": "Pricing in a world of increasing uncertainty", "attrs": null, "subkind": "subtitle", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "0f2e0624-6db0-4fcb-8d5f-75ff3463b895", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.45, "x": 0.07, "y": 0.77 }, "kind": "title", "text": "Actuarially sound and not unfairly discriminatory", "attrs": null, "subkind": "subtitle", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f70d5e45-fe34-4bb3-87b5-3beb43ab74f1", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "Curiosity Gap", "slug": "curiosity-gap", "agent": "Storyteller", "layer": "block", "matchId": "019dd95a-163f-72bd-8a0c-9b82e746d6db", "evidence": "Section header poses 'What are the key challenges to overcome?'", "confidence": 78 }, { "name": "Credibility Transfer", "slug": "credibility-transfer", "agent": "Storyteller", "layer": "slide", "matchId": "019dd95a-163f-72bd-8a0c-9ee8aee7ee40", "evidence": "Quotes industry adage 'There is no bad risk, only bad pricing' to borrow authority", "confidence": 78 }, { "name": "Problem-Agitate-Solve (PAS)", "slug": "problem-agitate-solve-pas", "agent": "Storyteller", "layer": "slide", "matchId": "37beae5e-7c22-4044-be27-4e8a2eec71fa", "evidence": "There is no bad risk, only bad pricing.", "confidence": 0.6 } ], "frameworks": [], "arcBeats": [ { "to": 8, "from": 8, "beatId": "019dd95a-0702-74a3-87e4-11a28aa1e51e", "arcName": "The Consultant's Gambit", "arcSlug": "consultants-gambit", "beatName": "Evidence & Proof", "beatSlug": "consultants-gambit-evidence-proof", "evidence": "Key challenges to overcome (uncertainty, fairness, regulators)", "position": 4, "confidence": 85, "parentBeatName": "Evidence", "parentBeatSlug": "evidence" } ], "loops": [ { "to": 10, "from": 8, "name": "So What Cascade", "slug": "41-so-what-cascade", "bestFor": "Data presentations, executive summaries, driving to recommendations", "matchId": "019dd95a-088c-724c-b310-044289e0d43b", "evidence": "p8 frames challenges, p9 has explicit 'The so what?' header, p10 lists three numbered actions", "position": 3, "objective": "Move from challenges to explicit so-what to three concrete actions", "structure": "The Data -> So What? 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