Dynamic Pricing Analysis

This paper presents a methodology that represents a significant enhancement to current pricing practices. The goal of this methodology is to estimate the impact that a rate change will have on a company's policyholder retention and the resulting profitability of this transformed book of business. The paper will present the basics of this methodology as well as where future work will need to be done to bring this methodology into mainstream pricing. The work that the authors have done in this area has focused on Private Passenger Auto Insurance but these techniques could be applied to other lines of business.