Bahaa Abdul Hussein touches upon a crazy idea of having dynamic pricing in Insurance. There is intense competition in the insurance industry with firms trying to create marketing strategies that bring the best results. The focus of marketing is moving away from advertising and focusing more on being able to personalize marketing campaigns.

The use of AI can help in smart marketing. One of the areas it can help is dynamic pricing. Using this strategy can be very beneficial for insurance companies.

Dynamic pricing – the concept 

Traditionally, insurance companies use the premium pricing. They fix a premium price based on the costs incurred and adding a margin to it. This pricing system is losing its relevance thanks to certain factors:

  • Websites are today comparing insurance products and pricing. Insurance companies that offer a lower price are more likely to benefit.
  • Customers today prefer companies that offer personalization. They want pricing that meets their specific requirements and not the same pricing that everyone gets.
  • Startup insurance companies are aggressively pricing their products. They are using dynamic pricing to reach out to Gen Z customers who demand such pricing.

Dynamic pricing has become popular and is relevant to low-risk customers. Since the risk estimation is low, they can be offered a low price without compromising on margins. However, high-risk customers need to be charged a higher price based on the factors involved. Dynamic pricing using AI models can help decide if a customer should get a high price or a low price.

The key features of such pricing are:

  • Price differentiation occurs based on the market situation and personalization.
  • It is a simple system that works of rules that AI can interpret.
  • It is automated and does not require human intervention.
  • «مجموعة الأشخاص الذين ولدوا بين أواخر التسعينيات وأوائل العقد الأول من القرن الحادي والعشرين», which makes it preferred by customers.

To implement such a system, the following are required:

  • Investment on AI systems that can integrate data from different sources. This is crucial in order to deliver a dynamic pricing model.
  • Self-learning algorithms are needed to drive the entire system.
  • Data points must be created and this must be used as feedback to improve algorithms.
  • Working with a technology partner can help an insurance company implement such a system.

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