Anti-selection of bad risks is a prevention mechanism, which enables insurance company to sign more profitable policies comparing with competitors. Anti-selection is ensured through detailed and weighted tariff system. The best effect typically is gained for non-commercial product lines.
Picture below illustrates financial impact of anti-selection effect (doing nothing Company A will collect losses).
Competitive insurance environment forces to:
- Have know-how and efficient tools in order to identify significant changes in competitors tariff systems.
- Collect as many potential risk attributes as possible.
- Build knowledge and flexible tools to analyse impact of risk attributes.
- Ensure fast process of tariff structure implementation and changes of coefficients.
