Joseph Petrelli, Demotech Price optimisation


Interview:


versus optimal price Joseph Petrelli, president of financial analysis firm, Demotech, discusses the true definition of price optimisation.


as a rightly timed pause.” In the conversation between the insurance industry and the National Association of Insurance Commissioners regarding the Casualty Actuarial and Statistical Task Force’s white paper on price optimisation, it may be time for the rightly timed pause. As technology permits us to utilise big data


M


and data mining to review the demographics and situations of individual consumers, some have defined price optimisation as a process that relies upon non-risk-related analytics to determine insurance premiums for consumers at whatever level the market will bear, rather than the traditional loss cost-based level. A variety of definitions and perspectives have been offered by the American Academy of


ark Twain said “The right word may be effective, but no word was ever as effective


Actuaries, Property Casualty Insurers of America, American Insurance


Association, Casualty


Actuarial Society, Consumer Federation of America and the National Association of Mutual Insurance Companies, to name several. What seems to be missing from the conversation is a singular, consistent definition, ie, the right words. Responding in part to the lack of a singular


definition, several departments of insurance and consumer groups have opined that optimisation is, in and of itself, unacceptable


price


“I use ‘optimal’ in this case to mean ideal, most favourable or advantageous, not highest, greatest or perfect. From this perspective, it is the right word.”


who have helped it grow in the seven years since its formation, Mike Schnur, a partner at the broker, told PCI Today. “We consider ourselves a specialty broker that


focuses on a few very large relationships. Unlike any of our competitors, our target market is focused on what we consider elite insurers,” explained Schnur. “Our success has come from starting the business


seven years ago to growing rapidly to 110 employees.” TigerRisk has made a spate of appointments,


with experts from across the industry swelling its ranks. In April this year, Tony Ursano, the former chief executive officer (CEO) of Willis Capital Markets & Advisory (WCMA) joined the broker. Just this week, it hired Steven Bensinger as a


senior adviser. Bensinger joined the firm from FTI Consulting, where he was a senior managing director.


TigerRisk bucks the trend to attract millennials R


einsurance broker TigerRisk Partners has attracted many entrepreneurial executives


Prior to working at FTI, Bensinger had roles at The Hanover Insurance Group, Coopers & Lybrand, AIG, Chartwell Re, Trenwick Group and Combined Specialty Group. Schnur praised executives across


the business as incredibly creative and innovative, pushing back and challenging the norms. “We’ve become a place where, if


Mike Schnur


you’re an entrepreneurial person looking to learn a lot and do things differently, we are the place to be,” he said. Generally, the re/insurance industry is having


a difficult time attracting millennials but Schnur is confident TigerRisk is doing well. “We actually have millennials contacting us,”


he said. “In five years’ time, we expect to be much bigger. We’ve only just been getting the message out.”


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27.10.15 TUESDAY


and perhaps illegal. Unfortunately, with numerous,


often Joseph Petrelli


conflicting, definitions of price optimisation, these actions complicate, rather than focus, the dialogue. The well known standard for rate


structures has been ‘not excessive, inadequate nor unfairly discriminatory’. An objective of these standards is that the insured, whether an individual or business, pays the optimal price. I use ‘optimal’ in this case to mean ideal, most favourable or advantageous, not highest, greatest or perfect. From this perspective, it is the right word. Technology, big data and a competitive create an operating environment risk, readily a


marketplace where


available carriers seek to evaluate information and then quote


premium. Technological advances and access to demographics aside, this is not news! This has been happening since the dawn of underwriting. As such, until there is a single, consistent definition of price optimisation, the preferred course of action may be a rightly timed pause. n Joseph Petrelli is president of Demotech. He can be contacted at: jpetrelli@demotech.com


TigerRisk plans to continue its expansion in


other geographies. The broker made its move into the Asian market earlier this year with the launch of a Hong Kong subsidiary, TigerRisk China Partners. “We are seeing significant growth in China and there a number of uninsured exposures that will become insured exposures. The


economy


itself is still growing significantly and we think there’s a lot of insurance yet to be bought,” said Schnur.


He views alternative capital as a benefit to the


industry, explaining that it offers more choice to clients, while challenging traditional reinsurance to become more efficient. “We’re also seeing an increase in catastrophe


cover and casualty. Potentially, changes to AM Best’s ratings could increase property-catastrophe purchases too. Larger companies are currently buying more and not less,” he said. n


DAY 3: Tuesday October 27 2015 | PCI TODAY | 11


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