Five pricing promise questions insurers should ask themselves in 2023

By: Antonie Jagga (AU), Mike Clough (AU), Kimberly Joyce (AU)

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Google ‘pricing in insurance’ and most search results focus on refunds to customers and remediation costs (upwards of $800m). What’s not often discussed, however, is the opportunity to get insurance pricing right.

General insurance pricing sophistication has increased substantially in recent years in a trend towards more tailored and competitive risk selection. At the same time, the number and complexity of products continues to grow.

As a result, insurers need strong controls and governance to ensure pricing promises and discounts are applied to customers’ premiums as intended. Insurers have an opportunity to streamline pricing and promises (for instance, removing no-claim bonuses that can be complex to communicate and administer), as well as boost governance over new and existing promises. Also, to mitigate risks and deliver a better customer experience.

In short, insurers have a chance to approach pricing proactively. Let’s unpack this.

Why now?

Pricing promises has become a priority topic for insurers due to evolving expectations, including:

ASIC’s focus on pricing practices: This is now a key area of investigation for the Australian Securities and Investments Commission (ASIC), with the regulator continuing to call on all general insurers to review pricing practices (and taking legal action against several insurers). Notably, ASIC has released new guidance on consumer remediation (RG 277).
Financial Services Royal Commission’s recommended reforms for the insurance industry: There’s heightened scrutiny around insurer’s behaviour and integrity following the Royal Commission, with insurers expected to guarantee their pricing promises in every instance as a minimum operating standard.
Changing consumer expectations: From environmentally and ethically sustainable products though to consumer law, customers are increasingly well-informed. They’re savvy, price sensitive, and aware of their rights, and their expectations have risen accordingly.

So, how can insurers approach pricing in 2023 in a proactive, holistic way so that they can better understand their customers and provide flexible pricing campaigns? Practically speaking, insurers should consider the following five key questions around pricing.

Five questions best-in-class insurers are asking themselves about pricing

1) What processes are in place to ensure you meet pricing promises on an ongoing basis?

To monitor pricing, insurance companies need to invest in a comprehensive controls framework, including ongoing testing. This framework should cover all aspects of price promises, from initial price decisions through to delivery.

Importantly, delivering pricing promises is the collective responsibility of the whole organisation, and the framework needs a dedicated multidisciplinary team (with experience in pricing, technology, risk and controls, customer communication and project management).

Similarly, while your framework must take a risk-based approach and deploy resources according to the areas of highest risk and coverage, it must also be proactive and forward-looking. Here, your promise management framework really comes to the fore. For example, what happens when you introduce a new promise? How do you manage existing promises? If you decommission a promise, how do you ensure it’s removed from all customer communications? Is the timing of that removed from front-end and back-end pricing functionality, too?

Consider: Do you have governance over the end-to-end pricing process? Does this identify all promises made to customers? Does your controls testing work in practice?

2) Given cost-of-living pressures, how are pricing promises and the value they provide communicated to customers?

Australians have experienced the highest annual increase in living costs on record, with car premiums up by record levels and the cost of home cover rising at near 10-year highs. It’s no surprise, then, that consumers are more price sensitive than ever. As a result, your customers need to know they’re receiving the value they expect, and this requires accurate, timely and transparent communication.

Consider: Is your promise clearly described to customers? Do all teams within the business understand the promise in the same way? Do new pricing promises correspond with existing promises? Are customers receiving a consistent and accurate message across all channels and collateral?

3) Are pricing promises attracting target customers? Do pricing promises have ongoing value, and does this value justify the complexity of implementation and monitoring?

Ongoing value is key here. Given the growing sophistication around pricing (including the range of products on offer), as well as the accelerating pace of change, it’s vital for insurers to continually monitor their pricing offering if they want to provide real value. But at what cost? Implementation and monitoring expenses must be balanced against benefits.

Consider: What do your customers really want? Do your customers pay attention to discounts (such as no-claim bonuses)? Or do they simply prefer a competitive price? (Especially, given the availability of price-comparison websites.) Where does value lie for your customers?

4) What other product features and benefits can be marketed to reduce reliance on potentially complex pricing promises?

Failings in either the monitoring and controls around promises made to customers, or in the mechanisms used to apply discounts in the premium calculation, can lead to incorrect premiums being charged.

Consider: What controls are in place around price promises to customers? Also, what promises are you making on claims? Because these require the same rigour as you apply to pricing promises.

5) What promises, made at other customer touchpoints or through intermediaries, also require attention?

Strategic partnering carries huge commercial benefits; however, it also introduces a new frontier for risk management. New regulations such as ASIC’s Product design and distribution obligations (RG 274) and the Australian Prudential Regulation Authority’s operational risk standard CPS 230, place obligations square on insurers to monitor and supervise third parties, including all promises made to consumers. Meanwhile, regulators are sharpening their focus on the issue.

Consider: What controls do you have in place to manage your risk associated with white-label partners? Do you have a strong ‘know your partner’ due diligence process? What monitoring frameworks do you have in place to manage partner risk? How are you proactively protecting your customers?

Ultimately, to ensure you’re an insurer of choice requires robust governance and controls when it comes to pricing promises.

Read more at PwC’s Insurance 2025 and Beyond.