Is the price really right? A look at US commercial P&C insurance pricing in 2023

Is the price really right? A look at US commercial P&C insurance pricing in 2023
Is the price really right? A look at US commercial P&C insurance pricing in 2023

The 2023 landscape of the US Commercial P&C market reveals that traditional understandings of pricing are perhaps outdated. An overwhelming 78% of insurance providers in the US acknowledge a pressing need to bolster their technological capacities. A significant proportion of these insurers express discontent, highlighting that the pricing platforms they’ve put resources into haven’t lived up to expectations.

In the new edition, focusing on the US market, Hyperexponential’s State of Pricing report delves into the pivotal challenges American respondents pinpoint. These challenges, they believe, are stymieing the growth and effectiveness of the Commercial P&C insurance sector. The report also sheds light on the essential elements needed for a substantive shift in pricing strategies.

Some critical areas of exploration in the report include understanding why current pricing doesn’t hit the mark, recognising the inefficient use of time and skills, acknowledging the untapped potential of data, and strategies to reimagine pricing dynamics. A significant area of interest is the potential of decision intelligence to bring about meaningful transformation.

Yet, amidst this digital revolution, an essential component appears to have been overshadowed. The continuous march towards digitisation in insurance sees both underwriters and actuaries expressing dissatisfaction with prevailing processes. The decisions regarding which risks to accommodate and at which rate profoundly affect the premium line in the Profit and Loss statements of Commercial P&C insurers. However, a staggering 78% of US-based insurance companies are sceptical about the sufficiency of their pricing technology. In fact, only 20% of respondents classify their pricing strategies as being truly data-driven.

Poor pricing strategies directly influence profit margins in the insurance sector. Over half, approximately 55%, of US underwriters and actuaries feel constrained by their existing pricing technology, believing it to be inadequate for maximising profitability. Furthermore, 62% of US insurers opine that their present pricing technology hinders them from making well-informed decisions. A significant 84% have reservations about the adaptability of their pricing models for future demands.

Considering the massive influence of pricing on profitability and the evident dissatisfaction with the current systems, it is hardly shocking that transforming pricing mechanisms is on the forefront for many. Almost all respondents, about 97%, are either currently investing in enhanced pricing technology or intend to do so in the upcoming year.

However, despite the significant capital funnelled into this domain, the desired improvements seem elusive. 58% of participants feel let down by their pricing platforms, believing they have failed to deliver on their promises. Furthermore, 54% are still waiting to realise the value of their recent investments in pricing technology.

Download the report here.

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