The complete guide to pricing decision intelligence

13-07-23

12 minutes

Pricing is the most important driver of the bottom line, but few insurers have successfully transformed their pricing decision processes. Pricing decision intelligence is the key.

What is decision intelligence?

Decision intelligence (DI) is the creation of a tight, iterative feedback loop between data, insights and the decisions they drive, in such a way that decision making gets better over time.

Decision intelligence is a team sport – and teams only win when they work together. The quality of your decisions is proportional to the tightness of this feedback loop

Why does decision intelligence matter in insurance pricing?

The word underwrite comes from the Old English underwritan, "write at the foot of," and originally is exactly what underwriters did, signing their names at the bottom of an assessment of risk, promising to pay in case of disaster in exchange for a set amount of money.

When insurers underwrite risks, they give companies and people the freedom to push the limits of what’s possible, whether it's launching reusable rockets into space or developing new AI technologies. The decisions insurers make drive innovation and empower society to outsmart the unknown – unlocking hidden potential in the world.

Insurers are making hundreds of decisions every day that vary in their scale of complexity and impact. Most decisions follow a common framework, but there are vast differences across the market in the quality of inputs and processes at each stage, and therefore vast differences in the quality of the resulting decisions.

Effective decision-making is reliant on predictive data and deep insights. More data, better data, and more accurate interpretation surfaces new opportunities for growth and profitability.

Even the slightest weakness in the decision engine can lead to ineffective decisions that reverberate throughout the business.

Inability to capture and surface data deprives underwriting decisions of emerging insights
Inability to rapidly deploy models means actuarial insights lag behind the market
Inability to collaborate and drive feedback loops weakens customer experience
Lack of automation and scalability saddles IT with busywork and impedes responsiveness

The time is now - insurers need to transform or die

Pricing is the most important driver of the bottom line, but few have been able to achieve meaningful change in the way they make pricing decisions, despite the potential of new technologies.

There is no more time to waste in a world that is changing so rapidly. Even in mature lines like commercial property, inflationary pressures have increased combined ratios past 100%. Insurers need to leverage all the data and insights they can and respond quickly to new types of risk so they can price them correctly.

Insurers today are missing new market opportunities, saying “no” when they could have said “yes” or vice versa. Weak decision-making means missed chances to drive down loss ratios, scale up profitable business, or improve efficiencies and the customer experience.

How you leverage your unique landscape of data and insights defines your comparative advantage

Why pricing models alone are no longer enough

For years, insurers have been attempting to turn pricing models into tools that help them make better decisions. But there’s a problem.

For insurers simply looking to replace spreadsheets, pricing platforms are a passable option. However, they weren't built for decision making – they don’t enable tight feedback loops for rapid iteration, or get smarter with each action. They were designed as a point solution used to do complex calculations and derive a price.

While the pricing algorithm is a central component of an underwriting decision (arguably the principal component) the pricing decision is about much more than just ‘give me a number’.

Pricing has become the foundation of a deeply integrated decision engine that’s a critical tool in the underwriting team’s arsenal. At the same time, the flows of data and insights in and out of the models have become increasingly complicated. This is the reality of working in a dynamic market – and the rate of change is only increasing, making it even harder to maintain effective feedback loops between the team members at the coalface.

Insurers need to be able to deliver and evolve these systems at the speed of the market.

In the face of rapid change, standard data becomes commoditised, with AI accelerating how easily and quickly this happens. Insurers must look to more challenging datasets for comparative advantage, meaning the ability to wrangle insight from even the most unruly and disparate datasets will be the difference between the winners and losers. Their limiting reagent becomes their ability to access, surface and process small, sparse or fragmented datasets like random spreadsheets; PDFs containing a mix of numerical and text data; and in more modern setups, continuously changing database schemas and API formats.

Legacy tools are not fit for the reality of the modern data landscape - one that includes small, sparse or fragmented datasets which must be transformed into, and combined with, deep business insights, and surfaced to make better decisions.

The good news is that tools exist to tame the unruly. There are open-source programming languages and libraries which combined with today’s flexible databases and versatile cloud infrastructure provide the foundation of a platform to ingest, analyse and execute on any data imaginable.

However, self-building this platform isn’t a viable option for most insurers, let alone the best use of their precious technical resource. They want to make money from insurance risk, not technology risk.

hx Renew is the world’s first pricing decision intelligence platform

hx Renew provides the answer.

hx Renew is the heart of your decision engine, automating key processes and capturing and surfacing the right data to the right person at the right time. It allows you to generate strategic insight from your BAU pricing actions and accumulate a coherent data asset that continuously improves with every decision.

It’s the only system that’s been purpose-built for the reality of small, sparse or fragmented insurance pricing data, and to drive the tight feedback loop between data, insights and decisions that form the foundation of world-class decision intelligence.

It forms the connective tissue that allows the entire pricing team to collaborate seamlessly. It creates a virtuous cycle that helps you make smart decisions today, and even smarter decisions tomorrow.

The result is transformative.

Actuaries are empowered to price effectively in a rapidly changing market.
Underwriters are empowered to make more profitable decisions in half the time.
Executives are empowered to make informed strategic decisions that drive a competitive edge.

How we do it

Every aspect of hx Renew is designed to improve your decision-making.

Rapidly build powerful models that help underwriters make better decisions

hx Renew leverages Python — flexible, future-proofed and access to the most cutting-edge tools on the market
Access pre-built templates and reusable components help you get to market with greater speed and confidence
Two-click release process with no reliance on IT resources

Capture and surface the right data at the right time

Automatically capture rich pricing data that can be surfaced to drive portfolio decisions.
Access a vast array of integrations during model builds and the point of pricing — including in-model MI
Live portfolio views to support executives with strategic decisions

Make it easy for your entire pricing team to collaborate with confidence