If your insurance pricing function feels harder than it should be, you’re not alone. And if you think the challenge lies in the complexity of actuarial models or the unpredictability of claims, think again. One of the most persistent, under-appreciated obstacles to effective insurance pricing isn’t technical at all — it’s linguistic.
In the second installment of our three-part blog series, we tackle the communication gaps at the heart of pricing confusion. We explore why conversations about pricing can feel so circular and frustrating — especially across business lines, geographies, or job functions — and how a shared vocabulary can unlock collaboration, accuracy, and speed.
Because if your teams aren’t aligned on what “pricing” even means, how can you expect them to build an effective pricing function?
The Guesswork in Pricing Conversations Starts With the Words We Use
In many insurance organizations, the word “pricing” is used so casually and so broadly that it loses precision. To a pricing actuary, it often means the development of predictive models or rating plans. To a commercial underwriter, it refers to evaluating risk and setting a final premium for an individual policy. To an analytics team, it may mean a technical exercise in segmentation or rate adequacy. And when people from each of these functions sit in a room together? Chaos can ensue.
That chaos gets even worse when you introduce regional differences. Imagine a personal lines expert from the U.S. having a discussion with a commercial underwriter in the London Market. Both may use the same terms — “rate,” “pricing,” “quote” — but mean wildly different things. Without clearly defined terms and shared context, conversations become confusing, frustrating, and unproductive.
Below we make the case for clearer conversations as the foundation for smarter pricing. Because a shared understanding isn’t just nice to have — it’s essential for making informed decisions, collaborating across silos, and building a pricing operation that actually works.
Why Insurance Pricing Conversations Are So Complex
Let’s start with a simple truth: pricing in insurance is a multi-step process involving many stakeholders, tools, and decisions. But instead of calling out each step, most practitioners just refer to the whole thing as “pricing.” That’s fine when everyone has the same mental model. But more often than not, they don’t.
What further complicates things is that pricing means something different depending on the line of business and the region. Personal lines tend to be more automated and rules-based. Commercial lines are more bespoke, with pricing decisions driven by underwriters. Local regulations, legacy systems, and corporate culture also influence how people interpret and use pricing terms.
So when confusion arises, it’s not because someone doesn’t understand pricing — it’s because they understand it differently.
Toward a Shared Language: Defining Core Pricing Terms
To fix this, we need a clearer, more consistent vocabulary. Here are a few terms that should be explicitly defined in any pricing conversation:
- Pricing: The process of determining what to charge a specific customer — the final premium shown in a quote.
- Rates: The premium calculated in advance for customer segments that meet specific criteria — often derived from data and analytics.
- Rating Plans: The collection of business rules that determine how rates are applied to customers based on underwriting factors.
- Ratemaking: The analytical process of determining rating plans, typically through the development of predictive models. This is what most actuaries refer to when they say “pricing.”
- Rating Engines: The technology systems that execute the rating plans in real time to calculate premiums for quotes or policy changes.
- Pricing Function: The end-to-end process of determining, refining, and operationalizing pricing across the organization — involving analytics, underwriting, business review, and systems implementation.
Defining these terms — and using them consistently — may feel like a small.simplistic step. But it’s a powerful one. It lays the groundwork for cross-functional alignment, faster execution, and better strategic decisions.
Personal vs. Commercial Lines: Different Needs, Same Goal
The value of shared terminology becomes even more apparent when comparing personal and commercial lines.
In personal lines, pricing tends to be a more automated process. Predictive models are developed to inform rating plans, which are then applied by rating engines to generate quotes. The result is that the price presented to the customer is often identical to the rate calculated by the system, with little to no manual intervention.
In contrast, commercial lines follow a more nuanced and flexible approach. While models may still be used to generate a technical premium as a starting point, underwriters play a much more central role in evaluating risk and determining the final premium. The process often involves manual inputs, consideration of market dynamics, and underwriter judgment, making it inherently more variable and complex.
These different workflows require different tools — but not different languages. Everyone benefits from a shared understanding of where analytics ends and underwriting begins, and what role each system plays in determining price.
Why Clearer Conversations Make for Smarter Pricing
Why clearer conversations make for smarter pricing goes far beyond simple word choice. This isn’t just a terminology issue—it’s a core business performance issue. When pricing conversations are grounded in a shared language and well-defined terms, teams are able to collaborate more effectively across regions, functions, and lines of business. The outputs of analytics teams are more likely to be understood, trusted, and acted upon, rather than questioned or overlooked. Business leaders can more easily align strategy with execution, making decisions faster and with greater confidence.Meanwhile, IT teams are better equipped to support updates to rating engines and related systems without the rework or misunderstandings that so often come from unclear requirements.
The result is that, rather than getting bogged down in debates, teams can focus on what really matters: improving the pace, accuracy, and responsiveness of the entire pricing function.
What's Next: Diagnosing What’s Broken in Your Pricing Process
Clear conversations are the first step. The next is self-awareness. Once you understand what pricing should mean across your organization, you can start asking whether your current process is actually working.
- Are your pricing updates too slow to respond to market changes?
- Do you trust the premiums you’re charging?
- Are your systems aligned — or are they creating friction?
- Can your teams work together without translation?
These are the kinds of questions we’ll tackle in Part Three of our series. Drawing on insights from over a dozen insurance pricing experts, we’ll introduce a diagnostic framework that helps you pinpoint what’s working, what’s not, and what to do next.
Stay tuned — because smarter pricing starts with smarter questions.