Dynamic ratemaking for insurance
First Claim
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1. A method of dynamically determining a pricing rate for an insurance product, comprising:
- (a) grouping demand for any of a plurality of products together into any of a plurality of market segments based on at least one of a plurality of pricing variables;
(b) analyzing demand behavior of each market segment for consumer price sensitivity;
(c) establishing a price associated with each analyzed market segment;
(d) generating forecasts of demand for each analyzed market segment; and
(e) optimizing a pricing rate of a specific product based on said generated forecasts of demand.
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Abstract
A method of dynamically setting pricing rates for an insurance product includes observing the demand behavior of customers and assigning the customer to a pricing tier based at least in part on the observed demand behavior of the customer as compared to historical demand behavior of customers in a same market segment. Empirical data or statistical data of customer demand behavior is analyzed to adjust pricing tiers and market segments.
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Citations
19 Claims
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1. A method of dynamically determining a pricing rate for an insurance product, comprising:
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(a) grouping demand for any of a plurality of products together into any of a plurality of market segments based on at least one of a plurality of pricing variables;
(b) analyzing demand behavior of each market segment for consumer price sensitivity;
(c) establishing a price associated with each analyzed market segment;
(d) generating forecasts of demand for each analyzed market segment; and
(e) optimizing a pricing rate of a specific product based on said generated forecasts of demand. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 14, 15, 16, 17, 19)
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12. A method of dynamically determining a pricing rate for an insurance product, comprising:
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grouping demand for any of a plurality of products together into any of a plurality of market segments based on a group of pricing variables, wherein the pricing variables include rating variables and other behavior variables;
assigning each market segment to a price tier;
generating a unique forecast of demand for each market segment, including testing the unique forecast of demand against actual observed demand, and determining a difference between the unique forecast of demand and the actual observed demand, and if the difference is of statistical significance, identifying the market segment associated with the unique forecast of demand as a critical segment, wherein the unique forecast of demand is based on historical demand consisting of a mean and higher moments of a demand surrogate for each of the plurality of market segments; and
adjusting the price tier of the market segment according to the difference, if the difference is of statistical significance.
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13. A method of determining an optimized price for offering an insurance product to a customer, comprising:
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analyzing attributes of a customer'"'"'s demand behavior;
assigning the customer to one of a plurality of price tiers based upon the attributes of the customer'"'"'s demand behavior;
forecasting whether the customer will accept an offer to purchase the product based on the assigned price tier; and
generating an optimized price based on the forecast.
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18. A method of dynamically setting pricing rates for an insurance product comprising:
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compiling data associated with historical demand behavior of a plurality of customers for the product;
developing a plurality of market segments based on the data associated with historical demand behavior, wherein each market segment has common attributes;
analyzing attributes of a particular customer and assigning the customer to a market segment having common attributes;
evaluating customer characteristics of the particular customer;
assigning the customer to a pricing tier based on the assigned market segment and the customer characteristics; and
providing a pricing rate for the particular customer based on the pricing tier.
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Specification