Are your pricing strategies acquiring and retaining the best customers?
Lifetime Value Pricing (LVP) provides you the ability to improve the profitability of your pricing segments without fully replacing existing pricing plans. The LVP solution enables you to competitively price long retaining customers versus those who leave quickly at high expense. By utilizing powerful predictive modeling techniques, insurers are able to address not only aggressive Combined Ratio targets, but also improve the overall mix of business written.
- Refines indemnity-only pricing by adjusting for expense differences.
- Operates as an independent second step in the pricing process.
- Produces more equitable rates by further aligning rates with underlying costs.
- Minimizes unprofitable segments, achieving a more consistent Combined Ratio.
- Improves policy mix over time with reduced frequency and severity.
- Process allows for complete customization: your data... your cost structure... slow or aggressive... new, renewal or both.
All Business Segments are NOT Equally Profitable
Understanding which of your customers are most profitable and then offering the best pricing to attract and retain them is paramount in this economy. Customers are constantly looking at how they can cut costs and get the best deals. It is important for you to be proactive in ensuring that the most profitable customers are being offered competitive rates based on their overall profit contribution. Accurate retention and lifetime value modeling is critical to identifying and understanding the characteristics of your customers who will likely stay and those who will leave.
Why are accurate retention projections critical to your operations?
- Long-tenure policies generate more revenue and are less costly to maintain.
- Long retaining customers tend to be more affluent with more cross-sell opportunities.
- Helps isolate short-tenure segments for improved profitability and/or underwriting practices.
Knowledge gained from Lifetime Value Pricing can be easily extended into other initiatives in your company:
- Critical input to proactive retention campaigns.
- Create cross-sell opportunities. Identify over/under-performing agents based on performance vs. predictions.
- Flag policies that are likely to cancel in the near future.
How Lifetime Value Pricing Works
The Lifetime Value Pricing Solution leverages powerful analytical software and multivariate models that identify and accurately price key Policy Life Expectancy segments. Lifetime Value Pricing can be introduced in two key pricing areas:
- Refining the traditional loss-based pricing process
- As a distinct step in the pricing process to optimize customer lifetime value
- Lifetime Value Pricing acts as a second step in the pricing process - distinct from indemnity pricing.
- It may also be incrementally valuable in core loss modeling.
Our Client Success Stories
- MORE THAN DOUBLED the acquisition rate of preferred customers.
- Reduced acquisition of non-profitable customers by 60%.
- Increased premium by 12% for the lowest retaining segments, making these customers more profitable.
- First-term retention expected to rise by 3-8%.
- Significant increase in top-line Net Written Premium and bottom line growth.
The Insurance Analytics Practice of Elite Analytical Solutions was established to support the unique needs of insurers, helping them develop solutions to address an increasingly complex marketplace. Elite offers custom Analytical/Business Intelligence/Data Management services to provide insurers with solutions for competitive advantage. At Elite Analytical Solutions, we know each customer is different and deliver solutions tailored to each client's distinct needs.