The Implications of Pay As You Use Insurance: A Scenario-Based Analysis

by Juan Mazzini,  Michael Fitzgerald, November 29, 2016
Industry Trends
Global

Abstract

Celent has released a new report titled The Implications of Pay As You Use Insurance: A Scenario-based Analysis. The report was written by Michael Fitzgerald and Juan Mazzini, senior analysts in Celent’s Insurance practice.

Key Research Questions

1

What dimensions should be considered when performing insurance scenario analysis?

2

What if insurance products change from pricing based on rating bands to a pay as you use model?

3

How does scenario analysis help insurers prepare for this and other business model changes?

What if insurance pricing changed from being based on rating tiers to price varying according to how often insurance is used? In this future state, the frequency of use of an individual user drives pricing. This report is the second in a series that details a scenario planning model which helps insurers extract clarity from confusion.
 
Future changes in market size, customer/company relationships, required skills, the competitive landscape, and the urgency of the scenario are factors considered in the scenario analysis. Celent expects pay as you use pricing to decrease the size of the market, provide more regular customer-company engagement, require development of significantly different skills, and make the landscape more competitive. The report also demonstrates how the process and results of scenario planning can be used to build consensus across the organization regarding priorities and to determine the best approach to business model changes.
 
“Pay as you use insurance is one of several changes underway which will impact the basic operation of the traditional insurance product,” commented Fitzgerald.

“The skills required to successfully manage pay as you use insurance span actuarial, product development, marketing and IT. Insurers moving to experiment with this approach now are learning critical capabilities which will give them a head start on their competition,” added Juan Mazzini, coauthor of the report.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

    Key Research Questions

1

Introduction

2

    Key Research Questions

3

    Description of Scenario Exercise

3

    Results

4

Scenario: Insurance Pricing Changes from “Pay as You Rate” to “Pay as You Use”

5

    Scenario Description

5

    Participants’ Assessments

7

    Celent Assessment

13

The Path Forward

15

Leveraging Celent’s Expertise

17

    Support for Financial Institutions

17

    Support for Vendors

17

Related Celent Research

18

Sign in to download reports and access personalized information