Dynamic pricing: mastering agility and strategy beyond GLMs

In our ebook “Six key challenges for a non-life pricing insurer“, we address the operational realities of non-life pricing. This third article tackles a commonly misunderstood topic: GLM models are a solid foundation, but they are not sufficient on their own to guarantee sustainable and profitable growth.

The challenge in modern insurance pricing is that while Generalized Linear Models (GLMs) are a powerful tool, relying solely on them does not guarantee sustainable and profitable growth. The true challenge lies in building an agile and comprehensive pricing process that goes beyond basic model application.

The market demands more than just sophisticated models; it requires the ability to quickly adapt to changing conditions and understand the nuances of customer behavior and competitive dynamics.

Your competitive environment, new entrants or products on the market and new consumer habits require you to enrich your pricing process with analyses and benchmarks of your pricing position, as well as to anticipate the behaviour of your policyholders or future policyholders.

It is true that Excel spreadsheets have for a long time predominated among insurance technicians for all types of calculations (whether actuarial or not…). But with the evolution of methodologies and tools available, the majority of insurers, especially in the most mature markets, now use GLM models for non-life pricing. The sophistication of the models is also often accompanied by a specialisation of tasks, for example the calculation of the technical premium, the creation of a Geographical Risk Model, a vehicle classification, etc…

This transition from Excel to GLMs and specialized tools marks a critical step, but it must be coupled with the strategic insights outlined in the following challenges and tips.

Given the rapid changes in the market, you should consider two key elements to ensure growth and sustainable profitability: the proper development of the tariff and the agility and completeness of your pricing process, which enables you to respond more quickly, efficiently, and sustainably to your challenges.

To ensure sustainable and profitable growth, a company must complement its GLM models with the entire commercial premium calculation process, including conversion or retention analyses (with analysis of customer behavior, price elasticity, etc.), customer value calculations, tariff optimization modelling (where permitted), competitive positioning and competitive analysis.
It must also ensure that it remains highly agile in the iterative phase of implementing the tariff in the market and carefully monitor the effects on subscription, growth and profitability in real time.

The answer to the third challenge therefore often lies in a different organization of the underwriting department, by expanding its remit and missions (and its resources) and generally represents the first concrete fundamental change after the strategic awareness of the company’s top management.

In essence, GLMs are a necessary tool, but they are not a substitute for strategic thinking and operational agility. The challenge lies in building a pricing process that seamlessly integrates advanced modeling with market intelligence and real-time feedback.

Successfully navigating this challenge often requires a fundamental shift in the organization of the underwriting department, empowering it to play a more strategic role in driving profitable growth. This represents a critical step in becoming a perennial leader in the insurance market.

GLMs remain essential, but they are only one tool among many. The difference lies in the ability to enrich the process: behavioral analysis, price elasticity, competitive positioning, real-time monitoring. It is this combination that turns a tariff into a genuine competitive advantage.

This third challenge points to an organizational shift as much as a methodological one. The ebook “Six key challenges for a non-life pricing insurer” gives you the keys to drive this transformation.