Here are five questions to prompt an assessment of how comprehensive is the information you have available to inform pricing decisions.

Do you know your Customers?

• Do you have a full and accurate view of the customer and the risk they present?
• How are you using external data to improve your knowledge of the customer and the risk?

Do You know your Objectives?

• What are you trying maximise (income profits..) over what period ( 1 years, 3 years..)?
• What constraints to do face; income targets, capital...?
• What market segment are you targeting?

Do you know your Costs?

• What are your claims cost and trends that are driving them?
• How do expected cost vary by risk characteristics?
• What are your expenses and which are sunk, which are variable?

Do you understand your Demand?

• What is the relationship between your price, quality and volume?
• How does it vary by customer segment?
• Are there any trends in the market?

Do you understand your Competitors?

• What are they likely to do with their prices?
• What objectives are they pursuing?

In my experience, too often insurers focus is almost entirely upon Understanding Costs. In particular, modelling of claims costs. Whilst this is critical it is not sufficient for effective pricing. Without attention to the other four questions you will only understand the cost of production but not the best prices to charge.