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GI pricing thematic review

GI pricing thematic review: involvement of actuaries in pricing of UK home and motor insurance

The UK home and motor insurance market has received a high level of regulatory focus in recent years, following growing concerns among consumer groups and regulators – particularly in relation to the issue of ‘dual pricing. Although the level of involvement differs across organisations, actuaries continue to play a key role in personal lines pricing. In this thematic review, we examine the role and influence of actuaries in this important area of work.

Our review has benefited from constructive engagement with a range of industry participants, as well as input from IFoA volunteers practicing in this area. This has provided a range of contexts in which to consider both the current position of actuarial involvement in this area and the standards and education in place to help members.

The findings of the review, endorsed by the IFoA Regulatory Board, are centered 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

GI pricing thematic review webinar

The IFoA held a webinar to provide members with an opportunity to learn more about the review findings. A recording of the webinar is available to members on the IFoA's Virtual Learning Environment (VLE).


Alan MarshallAlan Marshall, IFoA Review Actuary, said: “The UK home and motor insurance market has been through a challenging period in relation to pricing practices. The recent FCA pricing practices policy statement provides an opportunity for the industry to move forward, and actuaries in this field will be a key part of this. We hope that our findings encourage members to promote a balance of customer fairness and commercial considerations, and that actuaries can continue to drive forward data science and machine learning innovation in this domain alongside other professionals.”



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Events calendar

  • The Growth Mindset for Actuaries

    13 October 2021 - 8 December 2021

    Fully booked.

    This practical course is aimed at actuaries at any stage of their career who want to develop their own growth mindset and apply it to their work setting and personal or professional lifelong learning. The content of the course builds on the lecture given by Dr Helen Wright on Growth Mindset as part of the President’s 2021 Lecture series, and will be delivered over a period of 2 months, from mid-October to early December.

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    Actuaries need to take action now - but how?  With a focus on climate change, this session will provide informed insight to enable you to improve your knowledge and understanding of the issues involved, demonstrate how it will impact advice to your clients, and highlight prospective opportunities for actuaries within pensions and wider fields.

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    A joint webinar from the CMI Mortality Projections and SAPS committees that will cover: recent mortality experience in the SAPS dataset and the general population; the CMI Model benchmarking survey; the MPC 2021 interim update paper; plans for CMI_2021; and initial thoughts on possible "S4" Series pensioner mortality tables.

    The webinar will be presented by Cobus Daneel (Chair of Mortality Projections Committee) and Matthew Fletcher (Chair of SAPS Committee).

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    Pension scams have become more prevalent as a result of the pandemic, and Trustees have increased responsibilities to protect members, which means that actuaries need to be in a position to provide advice in this area. Our specialist panel will include a professional trustee, an IFA and head administrator, two of whom are members of PASA.

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    The Covid-19 pandemic creates a challenge for actuaries analysing experience data that includes mortality shocks.  To address this we present a methodology for modelling portfolio mortality data that offers local flexibility in the time dimension.  The approach permits the identification of seasonal variation, mortality shocks, and late-reported deaths.  The methodology also allows actuaries to measure portfolio-specific mortality improvements.  Results are given for a mature annuity portfolio in the UK

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    In this webinar, the authors of the 2021 Brian Hey prize winning paper present a new deep learning model called the LocalGLMnet. While deep learning models lead to very competitive regression models, often outperforming classical statistical models such as generalized linear models, the disadvantage is that deep learning solutions are difficult to interpret and explain, and variable selection is not easily possible.

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    The dominant underwriting approach is a mix between rule-based engines and traditional underwriting. Applications are first assessed by automated rule-based engines which typically are capable of processing only simple applications. The remaining applications are reviewed by underwriters or referred to the reinsurers. This research aims to construct predictive machine learning models for complicated applications that cannot be processed by rule-based engines.

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    With the Pension Schemes Act 2021 requiring a long term strategy from Trustees and sponsors, choosing a pensions endgame strategy has become even more critical. However, it is important that the endgame options available are adequately assessed before choosing one. With an ever-increasing array of creative and innovative options available, this decision may not be straightforward.