Turkish insurer Neova Sigorta, in collaboration with data and artificial intelligence ( AI ) company SAS and SAS Partner Sade Software & Consultancy, has launched an initiative to offer better auto insurance premium prices to up to 95% of its customers.

The project, among the first of its kind in the Turkish market, will use AI in the form of advanced machine learning ( ML ) to optimize how it prices auto insurance. This advancement is projected, according to the insurer, to save its customers money and decrease its overhead costs.

Neova Sigorta selected SAS Dynamic Actuarial Modelling, a pricing solution with AI-based premium modelling for general and life insurers, as its platform of choice for its transformation. Software and consultancy firm Sade Yazılım will be the initiative’s integrator.

Similar collaborations between SAS and Sade demonstrated that the right pricing policy can increase sales up to 15% and decrease the insurer’s combined ratio by 10%.

The deployment, expected to last between six and eight months, will help the insurer offer more appealing prices to new and existing customers. It is also expected to significantly increase market share in new regions and bolster renewal rates in established regions.

Auto insurance pricing has historically been based on generalized linear models ( GLMs ). Although these models have good interpretability – performance is predictable and easily explained – the accuracy of estimates tends to be limited, ultimately resulting in higher prices and lower sales.

In addition, limited sample sizes and risk assessment policies significantly deteriorate the quality of the data used to train GLMs, which can cause errors and introduce bias.

Unlike GLMs, the insurer notes, ML algorithms do not make any assumptions about the properties of the data the models are using. These algorithms also consider more variables that define customer behaviour and are designed to extract more granular patterns in the data. Therefore, ML algorithms produce much more accurate – and realistic – results.

“The ML-based pricing project with Neova Sigorta and SAS is of special importance to us, as it is one of the first and finest examples in the region,” adds Deniz Çelik, Sade co-founder. “Neova Sigorta truly understands the importance of AI and ML, and the company’s knowledge and vision put them ahead of many players in the market and in the underwriting field.”