Price Elasticity Modeling - Considerations on Theoretical Aspects and European Regulation

In recent years, predictive modeling has made significant strides, enhancing risk models in pricing and drawing increased attention to areas like demand modeling. On the regulatory front, the British FCA has banned "price walking"—the practice of setting different prices for new and existing customers based on varying price elasticities—while EIOPA is actively consulting on similar measures. This webinar will explore demand and price elasticity from an actuarial perspective, examining different modeling approaches and addressing challenges like extrapolation. We will discuss how to interpret observed data to derive accurate price elasticity and highlight how these second-order effects—linked to premium offerings and demand at flat renewal rates—necessitate adjustments in traditional risk models. Additionally, we will delve into the regulatory implications of price modeling and demonstrate practical applications for actuarial work.