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Price Optimization of Tariffs in Motor Insurance

Student: Chulkov Ilya

Supervisor: Alexander Sirotkin

Faculty: St.Petersburg School of Economics and Management

Educational Programme: Big Data Analysis for Business, Economy, and Society (Master)

Final Grade: 7

Year of Graduation: 2018

In today's market, it is widely recognized that the two main tasks facing insurance for individual risks (auto insurance, property insurance) is the tariffing of the insurance product and competition. The modern financial industry increasingly uses new approaches to tariff optimization that can balance profits and sales volumes and take into account the scenarios of the behavior of consumers and competitors. The use of such methods allows us to systematically increase the value of business and, more recently, has been practicing in the field of individual risks with an increasing number of insurance companies. Price optimization is the practice of selling insurance products with similar marginal costs at different prices for different customers. In the context of insurance, this concept of "non-risk" price discrimination does not include price-related price movements that reflect differences in the expected marginal cost. In the past few years, price discrimination has become more common in retail insurance While more sophisticated charging models provide a competitive advantage to those companies that use them, they are in fact still a development of a cost-based approach. Having built models of how a consumer reacts to discounts, marketing actions, actions of competitors and other events related to a change in the price or quality of service, insurers can get a better understanding of what constitutes consumer demand.

Full text (added May 31, 2018)

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