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Old 03-26-2018, 11:55 AM
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Gareth Keenan Gareth Keenan is offline
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Default Where to apply a multipolicy discount?

Say you want to launch a multipolicy discount between one or more lines of business.

Whereís the appropriate line to offer the discount, or at a minimum, what are all of the considerations? As far as I can tell, some of the considerations are as following.

Are you offering the multipolicy discount for lines A and B to get more people to purchase line A?
Is it with hopes that eventually they will purchase lines A and C, or even A, C, and D?
Under what circumstances would it be wise to offer the discount to both lines A and B?
Which line has the larger premium?
Which line is more or less profitable?
Which line is inherently more or less risky, or does A partially subsidize B or vice versa?

What else should you consider for where the discount should be applied?

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Old 03-26-2018, 12:01 PM
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I miss Feldblum's Asset Share Pricing paper . . .

There are two points of consideration that may actually be at great odds against each other:

1. Marketing & Retention: Producers like the MLD as it helps them sell more products; increase total premium (which subsequently increases total $ from commissions). Today's consumers seem to be strongly swayed by the discounts they could/should get.


2. Actuarial: Is a discount supported by data? Is there actually better experience (during the term of the policy, not necessarily over the total tenure of the policyholder with the company) for those who purchase two (or more) products from the same insurer to support such a discount? Is there an expense savings of some sort from writing two (or more) products?
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Old 03-26-2018, 12:12 PM
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Quote:
Originally Posted by Vorian Atreides View Post
I miss Feldblum's Asset Share Pricing paper . . .

There are two points of consideration that may actually be at great odds against each other:

1. Marketing & Retention: Producers like the MLD as it helps them sell more products; increase total premium (which subsequently increases total $ from commissions). Today's consumers seem to be strongly swayed by the discounts they could/should get.


2. Actuarial: Is a discount supported by data? Is there actually better experience (during the term of the policy, not necessarily over the total tenure of the policyholder with the company) for those who purchase two (or more) products from the same insurer to support such a discount? Is there an expense savings of some sort from writing two (or more) products?
I've seen someone miss the bolded before (I also many years ago worked for an insurer that bumped up the commission slightly for multipolicy, so it can go both ways)
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Old 03-27-2018, 02:08 PM
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Price elasticity of the lines of business. There might be less elasticity in more competitive lines and lines where coverage is mandatory.
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Old 04-03-2018, 07:30 PM
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Default Multi-policy experience

Vorian said,

"Actuarial: Is a discount supported by data? Is there actually better experience (during the term of the policy, not necessarily over the total tenure of the policyholder with the company) for those who purchase two (or more) products from the same insurer to support such a discount?"

I have seen one example where the multi-policy experience was worse than the single policy experience. This was personal auto and homeowners. Not the same population of insureds, apparently.
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Old 04-04-2018, 10:10 AM
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Vorian said,

"Actuarial: Is a discount supported by data? Is there actually better experience (during the term of the policy, not necessarily over the total tenure of the policyholder with the company) for those who purchase two (or more) products from the same insurer to support such a discount?"

I have seen one example where the multi-policy experience was worse than the single policy experience. This was personal auto and homeowners. Not the same population of insureds, apparently.
Was that a univariate analysis? Loss ratios of those with the discount vs. those without?
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Old 04-04-2018, 11:42 AM
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Was that a univariate analysis? Loss ratios of those with the discount vs. those without?
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