IIG News

IIG Insights article: Retail Insurance Pricing – How do we factor customer behaviour?

Gili Smadja, Data Scientist, Munich Re Global Consulting Unit

On 28 July 2021, the IIG held a webinar sponsored by Munich Re. The IIG Vice President, Thabo Twala welcomed all in attendance and introduced the topic of the day as Retail Insurance Pricing and to answer the question: How do we factor in customer behaviour?

This question is becoming increasingly important in todays’ personal lines market of 0% growth. Insurers need to compete in a static pool of the same customers. This has resulted in higher new business discounting, ever-increasing acquisition costs and deteriorating churn rates. Behavioural Pricing can assist insurers in understanding policyholder’s buying behaviour to increase long term profitability and book size to remain relevant in this competitive business environment.

To discuss this thought-provoking topic was the speaker of the day, Gili Smadja.

Gili Smadja is an insurance professional with over eight years of experience in the insurance industry, consulting and assisting insurers in all areas along the value chain to increase efficiency and profitability. Gili specializes in short term insurance pricing and regularly contributes to industry papers and presentations on behalf of Munich Re.


Gili started his presentation by describing the competitive landscape of the South African Insurance market, by using the personal lines motor insurance market as an example. We can view this market as an ocean with fish, whereby all insurance companies are fishing in the same ocean.


In determining the premium, there are 3 dimensions of pricing:

  • Risk Modeling
  • Behavioural Modeling
  • Competitive Market Analysis

In order to fully determine the premium, Data analytics is important as a factor to understanding the risk and to price accordingly. This data is categorized as Internal information and External information.

Internal information includes, (1) Customer information (personal information); (2) Vehicle-based information; (3) Territorial/ Economical information (the area where the risk is based) and finally, (4) Claims history.

External information on the other hand consists of (1) Vehicle Technical Characteristics, (2)Territorial/ Economical information ( Crime rates in the area, population density, etc), (3) Risk Contextualization (Road riskiness, accidents, traffic, road works, etc) and lastly, (4) Benchmark (Market prices from other insurers).

This information is used by insurance players to better improve their pricing models and obtain a comprehensive premium.

How then do we factor in customer behaviour? Gili made use of a good example of twin brothers and explained how their premium might differ based on their personal preference, risk info and behaviour.

In closing, the speaker explained how insurers can make use of the “customer journey” theory to upsell or cross-sell to their customers. He also touched on Organisational Change Management by highlighting a proposed structure that organisations can implement to reduce loss ratios without having to decrease retention rates.


The insight ended with a Q&A session. Thabo thanked the sponsor, Munich Re as well as the speaker, Gili Smadja.

We encourage the IIG community to register on the IIG CPD vault to earn CPD points for attending the insight sessions. The recording of the insight has also been saved on the IIG CPD vault.

The article was written by Tebogo Raphathelo

This Insight Session was sponsored by: