Home and motor insurance have come under scrutiny in the last few years, following concerns around how pricing practices impacted long-standing customers. So it’s timely that we have just published our second thematic review report, sharing the findings of our recent review of actuarial involvement into the pricing of UK home and motor insurance.
Pricing is an area where actuaries can directly influence customer outcomes, either in ‘coal-face’ technical roles, or through influencing roles in management or oversight.
Different operating models across firms, and the involvement of pricing specialists from other disciplines and backgrounds, means the ultimate responsibility for pricing may not necessarily rest with an actuary. It is clear, though, that actuaries still have an important role to play in helping the insurance industry change perceptions of the UK home and motor insurance markets so that consumers can feel more confident that they are being fairly treated on price.
Actuaries need to remain relevant and vigilant to change, so that organisations continue to value the skills and advantages they bring to this important area of work. This includes a strong ethos of innovation, coupled with an ethical foundation through professional standards and guidance.
The findings from this thematic review are centred on two key elements, both in the context of actuaries sharing responsibility for pricing with other professionals:
• An increased focus on customer fairness, ensuring standards, guidance and education appropriately balance this with the commercial and innovation drivers important in pricing.
• Ensuring that advances in data science and machine learning modelling are adequately covered by standards, guidance and education.
Alan Marshall, IFoA Review Actuary, said: “Our findings support the continued involvement of actuaries in this key area of work alongside specialists from other disciplines and backgrounds. It’s important that actuaries continue to harness their skills and influence in a way that acts in the public interest for both their organisations and the consumers to whom they provide insurance cover. This challenge is perhaps one that applies to pricing far more than reserving or capital work.”
Read the complete report General insurance: involvement of actuaries in pricing for UK home and motor insurance.