Akur8 is revolutionising non-life insurance pricing with their cloud-based fully integrated platform. They’ve developed an AI-based insurance pricing solution that automates modelling for insurance companies while keeping full transparency and control of the models created as required by regulators
worldwide. With their machine learning native solution, Akur8 boosts non-life insurance pricing capabilities with speed and accuracy. We sat down with Akur8, and their business partners Andreas (Andi) Hueck, Head of Risk Modelling at Zego and Can Baysal, Engagement Manager at Munich Re, to talk about the practical implications of rate monitoring.

Andi and Can, how do your companies relate to the topic of rate monitoring?

Andi, Zego: “Zego is a commercial motor insurance provider that aims to provide the best price insurance for good drivers. We combine best-in-class technology with sophisticated data sources to save our customers both time and money. As head of risk modelling, I'm in charge of the modelling team. We build models around insurance risks or predicting claims, as well as conversion, retention and market modelling. To build these models, we use the appropriate statistical models, and we’re also always on the lookout for innovative predictive data sources that we can use for our modelling. For example, telematics data that we collect from our customers to improve our risk pricing.”

Can, Munich Re: “At Munich Re’s Global Consulting Unit (GCU) we provide, primarily insurers and MGAs, services such as underwriting, claims and pricing. My team tries to improve our clients KPIs with pricing sophistication. Most of the time, we implement machine learning algorithms into pricing processes, trying to improve price sophistication to help our clients achieve better KPIs.”

What makes rate monitoring important for insurers?

Can, Munich Re: “Rate monitoring is one of the fundamental components of the whole pricing process. With rate monitoring, you can learn if you need to make any changes in your pricing. And if the answer is yes, you need to understand what needs to change. I’ve been working mostly in P&C, health, motor and home insurance. These markets are quite dynamic. A lot of things can change in a couple of days, and whenever you roll out your new prices, it will be old in the next week. So, you need to understand what is changing, how it changes, and you need to try to align your prices accordingly.”

Andi, Zego: “Insurance is a very price-sensitive market. As a customer, price is the most important factor where I buy my insurance. If our prices at Zego are too high, customers search for a policy somewhere else. If our prices our too low, we are not going to be profitable. It is essential that you have a good balance between market competitiveness and loss ratio. By quickly identifying areas where we're under-pricing, we can adjust accordingly to make sure we're not unnecessarily losing market share.”

What’s the biggest challenge with rate monitoring?

Can, Munich Re: “The biggest challenge is in the execution. Insurers need to be quite efficient in terms of speed and quality, which takes a lot of expertise. Not all the insurers are in the same sophistication level when it comes to pricing. If you are not fast enough in execution, especially when it comes to pricing and rate monitoring, you will be too late.”

Andi, Zego: “Firstly, we need to be aware that something has changed in the market. Secondly, we need to be able to quantify that change and make a plan on how to react. Finally, we need to execute that plan. The quicker, the better. The foundation of this is what I call “good data and tooling”. We need to have accurate and timely data available. We also need to have the data pipelines and the tooling in place to be able to build our own models on top of that data and then be able to implement changes very quickly.

What’s the healthiest way to approach insurance pricing?

Can, Munich Re: “I think it’s a spectrum. On one hand, if you have good predictive models, good underwriting rules and if you are moderating your rates efficiently, you only have to make small price adjustments, and you don’t need to disrupt your business. On the other hand of the spectrum, if those things are not good enough, or if there are big and sudden changes in the market, you might need to make big adjustments. Insurers prefer more frequent pricing cycles as it is less disruptive for your customers, but this takes more effort.

If you manage to run all the analytics and rate monitoring processes quickly, you only have to make incremental price changes, which doesn't hurt your customer relations that much. But, if you’re forced to make big adjustments, you have to have some certain controls in place. The healthy way is generally the sophisticated way where you have more frequent pricing cycles and where you make small adjustments.”

Andi, Zego: “Totally agree. Pricing accurately and fairly is very important. It’s not a good customer experience when a customer goes to renew their insurance, and there is a large price shock. It’s essential that you try to minimise huge price changes as much as possible, and you do that by staying alert. We now have data and tooling in place to automatically detect changes in market prices in particular segments on a daily basis. This way, we can go ahead and decide if we want to act and make these updates very quickly so that we have small and frequent updates, to keep us as close to the optimal rates as possible.”

Are there different motives for rate monitoring?

Can, Munich Re: “I would say there are two approaches, with the first one being more reactive. Insurers might want to keep their current position in premium production, market share or profitability. And in that case, they rate their monitors to understand how far they’re away from their optimal position and they try to react to the changes. These changes can either be macroeconomic indicators like interest rates or exchange rates, or there might be some changes in risk costs, like claim frequency and stability, which happened during Covid. There are no insurers that have any historical data that can represent an effect like Covid. In that case, insurers depend on their rate monitoring and try to understand how they can improve their rates in time.

But there’s another, more proactive and sophisticated approach – which is actively thinking about how to drive a portfolio, either through volume or through profitability. Insurers with sufficient processes in place might play around with those. One month you can focus on premium production, and in the next month, you can focus on profitability. So, once you have an aim and once you know where the problem is coming from, then you have a motivation to change the price.”

Is there anything AI contributes to rate monitoring? 

Can, Munich Re: “We need to be able to react at speed to any changes that we see. Automation and Generative AI can become very important. We need to be able to get notified of any changes that are happening, and we need to be able to react quickly to those changes. It’s all about data, tooling, making decisions quickly and implementing changes quickly.”

What’s the biggest advantage of having such a quick data pipeline?

Andi, Zego: “Execution does not only relate to rate monitoring, but it applies to any process or any step of a pricing process. We are collaborating with Akur8, which allows us to build many predictive models in a very short amount of time. We can now spend more time generating insights and making an impact. We need to keep up with the new dimensions and implement this into our pricing processes – we need to train ourselves and train the trading explanation of pricing, lectures and experts.”

Who are Akur8?

Akur8 is transforming the non-life insurance industry with its innovative suite of pricing and reserving solutions.

Their Next Gen Pricing and Reserving Platform combines cutting-edge technology with actuarial excellence to drive business value, bringing speed, performance, transparency, and reliability to insurers of all sizes.

Akur8 serves 250+ customers across 40+ countries, including AXA, Generali, Munich Re, MAPFRE, HDI, Tokio Marine, and MS&AD. Over 3000 actuaries use Akur8 daily to build their pricing models and reserving projections across all lines of business.

Curious about Akur8? Contact Akur8 to get a free demo of its Next Gen Pricing and Reserving Platform.

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