1. Pricing and Revenue Management
in
Health Insurance
PRM Group Assignment
Rachit Bhagat
EPGP 2009-10
Rajendra Inani
Shashank Bhansali
Vishal Sharma Instructor: Prof. Vinay Singh Chavan

2.  Beginning 1950 – instead of geography, other
characteristics being considered
 Advance Statistical Model Techniques for risk
assessment ( Computer based)
 Predictive Model for customer rating
 Underwriting Model

3.  India spending on healthcare – 5% of GDP
(Japan – 7.9%, UK – 8.4%, Brazil – 7.5%)
 Public Sector expenses – 26% in 1996
reducing to 20% in 2006
 Household expenses – 67% moving to 76 %
 14 % per annum increase in Household
healthcare expenses

4.  Government Schemes
 Employees’ State Insurance Scheme
 Central Government Health Scheme
 Employer cover in PSUs
 Indian Railway
 Private Insurance Schemes
 Indian Population – 15% in prepaid scheme, 2% in
Private Insurance schemes
 Universal access to Health Care is illusive
 High reliance on Out-Of-Pocket expenses

8. Geography
Demography
Niche
Experience
Perceived value
Skills
Capacity to pay
Cost of delivering services
Competitors' fees

9. Competitive Reputational Liquidity
Market Risk
Risk Risk Risk
Regulatory Underwriting Operational
Credit Risk
Risk Risk Risk

10.  Discovery
 Channeling of concepts through a cross functional
team
 Initial review of ideas and decision to commit
resources to further study
 Scoping
 Preliminary feasibility study to assess project
requirements
 Market research study and competitive analysis
 Business Case and Development
 Further refine product idea and develop business case
with initial pricing, costs and sales projections

11.  Testing and Validation
 Documentation and Approval
 Launch
 Deliver to market a complete and
serviceable product.
 Post-Launch
 Tracking, reporting and assessment of
product and performance for future
refinement.

13.  Claim propensity models express how customer
attributes are predictive of their inclination to report a
claim. These models are used to develop new rating
plans or customer scoring systems for underwriting.
 Hard Attributes Used in Rating Plans - Age of person,
gender of person, and his location.
 Soft Attributes Used in Rating Plans –Years of
insurance, Number of policies, Choice of payment plan,
Occupation, Years at current address, and last year’s
claim.

14.  Market situation models express how the company’s
competitive position and the market’s competitive
intensity vary by segment or niche within the market.
 Competitive market analysis using market situation
models is used:
 To help identify segments where the company’s prices are low
or high relative to the market
 To understand the competitive intensity in each segment and
support strategic decisions regarding product deployment in
different competitive segments
 To understand the potential scope for price changes and what
impact such changes would have on market positioning.

15.  Customer behaviour models help companies
understand how current customers will react
to price changes for retention and how price
levels will affect new business development.
 The price elasticity function takes into account
different variables including the history of
price variations, brand strength and
awareness, distribution channel and other
significant factors.

16.  Individuals, not groups, are decision makers
 Individuals decide what products to buy, as well as,
where, when, and how to buy them
 Health care insurers largely focused at serving groups,
not individuals
 Sharper insights about consumer, better product
management, risk management, consumer-oriented
medical management

17.  Price optimization the way forward
 Components of effective price optimization
 Cost models
 Competitive management analysis
 Customer elasticity models
 Optimization techniques

18. Thank You