Understanding on difference between new business vs renewals

Discussion in 'SA3' started by StartedThinking, Feb 2, 2022.

  1. StartedThinking

    StartedThinking Keen member

    Hi

    I have seen a lot of answer scripts talking about new business vs renewals

    one thing I can recollect new business is costlier to acquire, renewal less costlier
    But I am not clear about split importance in terms of

    reserving
    Capital modelling
    Pricing: although above point might contribute to premium
    can anyone please help me understand this better
     
  2. Ian Senator

    Ian Senator ActEd Tutor Staff Member

    That's a very open question! Perhaps you can be more specific about which element you don't understand?
    Splitting data into various homogenous groups is just one part of any exercise - be it reserving, capital modelling or pricing. One common split is by new/renewal simply because the business may behave very differently depending on whether it's new to the company or has been around for a long time. Yes, expenses are the obvious big difference, but also, for example, claims behaviour and risk profiles vary between new and renewal business.
    Hope that helps!
     

Share This Page