“The purpose of price optimization is to extract as much profit as possible from policyholders, who are often required to purchase insurance policies,” according to a February 2015 press release from the Consumer Federation of America.
In this three-part series of articles, Lynch explains what he calls the ultimate irony—that “the Allstate plan that kicked off the brouhaha might not even be price optimization.” Here, in Part 3, he explains that what is being maximized is retention, not price, as he brings together concepts explained in Part 1 and Part 2 of this article series.
Lynch was asked by Allstate officials to review and write about the plan, but he independently chose Carrier Management to publish his article. The article is based on his review of a report by another actuary, information from Allstate and knowledge he has gained from his study of price optimization over a two-year period.
Part 3 of a three-part article series.
Is that what Allstate is doing with its Complementary Group Rating?
We’ve spent more than 4,000 words in Part 1 and Part 2 of this article series learning how Allstate’s plan operates. We followed the reasoning of actuary Irene Bass, a former Casualty Actuarial Society president and a former member of the American Academy of Actuaries’ board of directors. Let’s put that effort to good use.