Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. Profitability Challange in Casco – Putting Demand into Work İstanbul, 07.04.2014.

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1 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. Profitability Challange in Casco – Putting Demand into Work İstanbul, 07.04.2014

2 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. Agenda  What we are facing … The big picture - A look at the market  What we do and how we do them … Current applications of the companies  What we should do … More on marketing  What the challanges are …

3 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. The Big Picture… 18 mio vehicles 4,7 mio 13,3 mio Agencies 37 non-life insurance companie s Banks Aggregators

4 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. What we do  Selling almost the same «packaged» product  Focusing on the same «customer portfolio»  Competing on only «prices»  Having nearly the same «after sales» service quality We (non-life companies) are… After all what we expect to see at the bottom line are…  Growth  Profit

5 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. How we do the pricing Adjust rates according to the market (usually downwards) Pure Premium Op. Cost Margin Cost Based Modelling #1 #2 #3 #4 Competitors

6 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. What we should do  Try to attract the remaining 13,3 mio.  Discover their utility functions.  What risks they think that they face.  How much they are willing to pay to avoid those risks.  Increase awareness.

7 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. What we should do  Try to optimise income for the 4,7 mio.  Discover elasticity of the demand per customer.  Discover the efficient frontier for the portfolio.  Optimise the probability of renewal or accepting the proposal.

8 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. What we should do ?????? Insurance Company’s View Customer View = u ( x 1 ; x 2 ; …) Customer behaves according to her/his utility function.

9 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. Cost-Based Modelling •Univariate & Multivariate Analyses •Frequency & Severity Models Competitive Pricing •Deeper benchmarking •Forecasting the competitors’ tariffs Behavioral Pricing •Demand forecasting •Renewal analysis •New business analysis What we should do

10 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. Reverse engineering the competitors’ tariffs Employ «what-if» scenarios Behavioral Pricing GoalHow? Measuring the effect of pricing decisions Discovering competitors’ pricing Construct demand models – train&test Forecasting customers’ choices Measuring the elasticity for demand Using optimization algorithms for goal management Growth/Profit Optimization How we should do

11 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. GWP Profit A C D Efficient frontier Attainable profit level for the same GWP level Attainable GWP level for the same profit level B What we should do

12 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. Challanges & critical points  Organizational engagement between marketing and actuarial functions.  Legal framework for capturing the competition data.  System requirements and speed to market.  Objective setting.  Choosing the right mix – technical & commercial.

13 Copyright © 2014, Anadolu Sigorta. Tüm hakları saklıdır. Thank you very much …