Re: Measuring Consumer Sensitivity

Andre Perez ( Andre_Perez@mail.busca.bm )
Fri, 20 Mar 1998 14:25:15 -0400

I remember about six years ago when I was still working in Canada, we
chose for Homeowner/Tenants policies the alternative of increasing the
minimum deductible along with a lesser rate increase. We were among
the first one to do it in the industry and other followed. The
consumers' response was better than previous years when we increased
the rates only.

I think the average consumer cares more about the bottom line (i.e. the
final premium) rather than the amount of deductible (to the extent that
it is not too drastic!).

I don't have any papers to refer you to, but I'm giving you real life
example. Hope this is of any help to you.

Andre Perez.

casnet@lists.casact.org,Internet-GW writes:
>To: casnet@lists.casact.org
>From: <Janet_Duncan@notes.pw.com>
>Subject: Measuring Consumer Sensitivity
>Date: Fri, 20 Mar 98 11:08:56 EST

>Is anyone familiar with any studies or papers that deal with measuring
>the
>sensitivity of consumer demand (i.e., the market disruption) to
>increases in
>deductible levels as compared to economically equivalent increases in
>premiums? (Preferably the focus would be on homeowners coverage.) One
>presumption is that, even though a premium increase of X versus a
>deductible
>increase of Y might be equivalent from the insurer's financial
>perspective,
>buyers might select the higher deductible (rather than the higher
>premium)
>because they don't believe they are going to have a loss anyway. Any
>thoughts
>on how to measure this or if it has been measured?

>Please reply to: Janet_Duncan@notes.pw.com

>Thank you.

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-- Andre Perez, FCAS FCIAAssociate & Consulting Actuary(441) 295-5063 x316


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