- #1
semidevil
- 157
- 2
Suppose I'm trying to answer the following question: How much more insurance premium will I get, by raising rates by 10%. for this exercise, I"m assuming price is the only factor, just to simplify things.
Lets say I give 20,000 quotes per month. Obviously, not all will purchase my policy because the price might be too high. Now, if I increase rates by 10%, I will probably have even less people purchase the policy. If all my quotes range between $500 to $1000, is it possible to do simple division and group my policyholders by the probability that they will purchase at the different price points? i,e if 5000 of my purchased policies are in the $500 price point, then I can say that the probability of purchasing a policy at $500 is 5000/20,000 (25%).
so I then sum up all the expected values (probability * price point) to get an estimate of how much premiums I will get from this rate increase?
Lets say I give 20,000 quotes per month. Obviously, not all will purchase my policy because the price might be too high. Now, if I increase rates by 10%, I will probably have even less people purchase the policy. If all my quotes range between $500 to $1000, is it possible to do simple division and group my policyholders by the probability that they will purchase at the different price points? i,e if 5000 of my purchased policies are in the $500 price point, then I can say that the probability of purchasing a policy at $500 is 5000/20,000 (25%).
so I then sum up all the expected values (probability * price point) to get an estimate of how much premiums I will get from this rate increase?