Actuarial pricing, capital modelling and reserving

Pricing Squad


Issue 2 -- December 2015

Welcome to Pricing Squad!

Pricing Squad is a newsletter for fellow pricing practitioners and actuaries in general insurance. Enjoy, and let me know your comments and ideas for future issues.

Today's issue is about predicting demand price elasticity using converted quotes only. I have been asked about it by two different people; one working for an insurer and one for a broker. The insurance person is interested in this subject because he struggles with data quality provided by his brokers, while the broker struggles with the volumes of data provided by aggregators.


Predict demand price elasticity using converted quotes only

Have you ever needed to predict insurance demand without having access to unconverted quotes? I have. It happened when I was modelling new business elasticity on aggregators and my colleagues in IT refused to maintain a database with more than 10 million unconverted quotes.

Scrap the conversion model

Can it be done? Yes. You can get more out of the information embedded in your price test if you step outside the paradigm of modelling conversion first and then elasticity as its derivative. Just model elasticity.

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