Reinsurance tutorials #34
What is a pricing tool?
In the reinsurance industry, Pricing Tools are used on a daily basis. They are vital to assess and evaluate risks while building strong technical foundations. They make it possible to simulate pricing effects and product changes while measuring the impact on the expected performance/return.
Pricing Tools on the Life & Health segments are used to quote Cat Risks, Credit and Group Life schemes, Individual Long Term policy, Medial programs, and so on.
Generally speaking, Pricing Tools and authority are not delegated to quote and do not bind the reinsurance company to its partners (Ceding Company or brokers). Indeed, Pricing Tools are more often used for internal use.
There are nevertheless specific cases on which reinsurance companies can decide to operate differently by sharing the Pricing Tool they develop with a selection of preferred, trusting partners in which they believe thanks to their strong organization, technical capacities, and managerial skills they know how to apply well.
Here below is an example:
By the beginning of 2020, CRR Re deployed on an online Pricing Tool platform designed to quote Group Life schemes, named MyQuote.
Originally designed as an internal Tool, they decided to give their partners the possibility to access it as an additional service, in the context of a Treaty Agreement.
In supporting selected Ceding Companies, they expect to build a larger, more profitable book and enhancement partnership that will benefit both organizations.
It also gives the Ceding Company an opportunity to improve management, Pricing and control on this segment.
Furthermore, it offers technical protection in the eyes of the competition, as all rates are protected in the engine.
Since it is a web based interface, it offers a limited number of exchanges (paper, files and so on) – all past documentation is stored in the same place, easy to access and consult.
As per the demand of the ceding Company, the company can review pricing or treat more complex cases on which they do not have authority, and the process remains very simple between the insurer and reinsurer.
Here are some of the screens extracted from MyQuote, showing the quote process from the Ceding Company’s point of view.
Ceding Company GL portfolio & Quotes status
It is possible to give an overview of the ceding Company pipe and status of the various schemes quoted.
All quotes released can be consulted and data for previous years can be retrieved in 1 click.
It also helps the Ceding Company to pilot its GL portfolio and implement necessary actions.
General information on a quote
After having filled in key information such as the name of the group, the industry and activities in which the company is involved, the country of the risk or its status, theCeding Company can upload the census (detailed profile of the group including SI, employee age and occupation by simple click on the available option.
Benefits
The Ceding Company will choose the list of benefits associated with the client’s request. Death – all causes – is the main benefit, and should be part of the list regardless of the additional ones selected.
Different rates are mentioned: technical rates, rates related to experience, referrals (when a Ceding Company requests a modification of terms), rate of premium that represents the final one calculated by MyQuote.
Summary
It gives an overview of the main parameters of the scheme quoted, including net rate, premium, number of heads covered, TSI, FCL, among others.
From this point, the Ceding Company can accept, decline or refer the quote to the reinsurance company or even calculate a new option (with different benefits, for example).
If the Bus is bound, the Ceding Company can issue the reinsurance certificate that will summarize the main terms and Conditions of the accepted case.
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