The "Big Three" Pricing Models are Defining 2012 and Beyond

Insurance companies have been using to much success, three pricing models over the last few years. These highly sophisticated computer algorithms have kept pricing soft during the recession. This has been good news for buyers of commercial insurance. For 2012 and 2013 insurance companies are using the three models, Catastrophe, Predictive, & Economic to set rates, and most are predicting higher pricing. There is a catch however and that is capital. Most insurance companies have tons of it and this is creating a interesting scenario for company CEO's. Do they follow the models or do they make rate decisions based on capital reserves?. This is uncharted territory for insurance companies and how it plays out in the pricing cycle over the next few years will be interesting to observe. I have read some analysts predicitng  "mini" cycles of hard and soft rates over the next decade. This could be due to the accuracy of modeling, or capital surplus. Any way you slice it the " how to price insurance"  books are being re-written everyday. until next time be careful out there and know your risks. K

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