Pricing is even more of a different story, being both a core and highly regulated process. Naturally, technological innovations such as Artificial
Intelligence and Machine Learning are now used by a number of pricing teams but - and this is a key but - on an exploratory basis, with a try and learn
approach that cannot be used in production nor filed for regulatory purposes. Which is, let’s acknowledge it, one big limit. The very core of the pricing process has indeed largely remained a ‘dark niche’, mastered by few technical experts, mostly using manual legacy tools.
Why is this changing?
Structurally, the market environment has been shaken up, calling for
new value creation and differentiation levers: low interest rates, rising
competitive pressure from GAFAs and disruptors, evolving customers
standards along with the rise of insurtechs. (See our position paper:
‘The Transformation Imperative for Insurers’)
All hell broke loose with COVID-19, an unprecedented accelerator of
change. To reference just one data point: a whitepaper by Salesforce1
predicts that the insurance market will contract due to an expected
global GDP decrease of at least 5.2%. Coming out of the pandemic,
insurers are likely to face hardened market conditions.