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Earnix: getting the price of insurance right

InsTech’s Ali Smedley speaks to Andrew Collins, Head of Business Solutions Insurance, about how Earnix can help insurers with rating and pricing, the benefits and challenges of usage-based insurance and the recent FCA price reforms.

Member Spotlight: Earnix

What problem does Earnix solve for insurers?

Deciding the price of insurance can be challenging. Traditionally, insurers have understood that they cannot get the price right for each customer. Instead they have pooled risk, as sharing the risk across enough people means that key rating factors can be applied to discrete cohorts. Such an approach captures the majority of the risk being transferred but inevitably it is an approximation. At Earnix, we refine this process by creating sophisticated statistical models and optimisation techniques to enable more accurate pricing for each customer. The models include how past claims experiences may affect the future, along with the effects of inflation and business disruptions. Insurers better understand each customer’s risk and can price policies accordingly.

Andrew, what does your role at Earnix involve?

​I work in the Global Business Solutions Engineering Group as head of the international division. Earnix has a set of products we offer customers, but there is never a one-size-fits-all solution. My team engages with each customer to understand their specific requirements, evaluate opportunities and drive the right pricing approach.

Earnix offers solutions for rating, pricing and personalisation. What does your “Personalize-It” product do?

Insurers can offer various options within each product – for example, a car insurance policy may have 50 different options. However, these options do not necessarily map onto each customer’s needs effectively. The aim is to provide more personalised product options without overwhelming customers with a large number of choices. Using data provided by the insurer, Earnix’s Personalize-It software utilises statistical techniques to narrow down the potential policy options relevant for each customer. This is done using multinomial logistic regression, allowing a number of likely outcomes to be ranked. Insurers are therefore able to provide a more personalised customer service.

How has Earnix worked with INSHUR?

INSHUR offers insurance to the commercial auto industry, focusing on taxi drivers, couriers and food delivery drivers. INSHUR provides personalised insurance based on the driver’s average trip length, locations and ratings. INSHUR now uses Earnix’s analytics tools to speed up the pricing and personalisation process.

What are the benefits and challenges of usage-based insurance?

Insurers can more accurately price insurance for individual drivers using large amounts of telematics data. Insurers can offer coverage on a usage basis, providing a more personalised product at a potentially lower cost for the customer. However, insurers can face some challenges with this type of insurance. If a vehicle has multiple drivers, it can be challenging to know who is using it. There is also potential for fraud, such as if a driver turns off the telematics device. However, unusual patterns can be detected through telematics data.

How are the recent UK Financial Conduct Authority (FCA) reforms affecting price setting?

The FCA’s price reforms became effective in January 2022. Historically, some insurers were charging more for renewing policies than new policies, despite having the same basic risk. Insurers are now unable to offer different prices for renewed and new policies. To compensate for this, insurers are now charging higher premiums for new clients. The difference between the highest and lowest premiums has narrowed on aggregator websites. However, the FCA reform is not the only reason why price determination is increasing. Insurers are also accounting for inflationary effects on the cost of materials for repairs.

What disruptive insurance trends does Earnix think are on the horizon?

Access to increasing amounts of data, for example through IoT devices in homes and commercial property, is likely to be the greatest insurance disruptor in the immediate future. This can enable an improved understanding of risk but also risk mitigation.

How does Earnix choose which companies to partner with?

Earnix partners with companies that can provide value to our customers. For example, a prospective customer had invested in Sapiens’ policy administration system, so it made sense for us to partner with Sapiens to integrate our two solutions. Earnix is also looking to partner with insurtechs that have a solution we could work with as well as system integrators.

What areas is Earnix planning to expand into across 2022?

Earnix is looking to support insurers throughout all operations. Our current products all have specific functions that focus around pricing, but the techniques behind them can be applied to many other areas. This means that we could provide insurance operational support across all processes, for example claim settlement and fraud detection. This year we are also expanding into the banking space.

What companies is Earnix looking to connect with?

Earnix is looking to partner with companies struggling with any part of an insurance process that requires an embedded statistical or machine learning component. This is across all lines of business and all processes.