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IAI Actuarial Core Principles · Business Economics · Pricing strategies in the financial services sector

Which pricing objective is most clearly followed by an Indian insurer that deliberately sets premiums just high enough to earn a satisfactory, rather than maximum, return, so as to keep regulators and customers content?

The objective is satisficing. The firm aims for a satisfactory level of profit rather than the maximum possible, balancing the interests of shareholders, regulators and customers. Other objectives such as revenue maximisation, penetration or predation pursue sales, share or rivals' exit instead.

  1. ASatisficingCorrect
  2. BSales revenue maximisation
  3. CMarket penetration
  4. DPredatory pricing
  5. Price skimming

Explanation

Satisficing means aiming for a acceptable level of profit rather than the maximum, often due to separation of ownership and control or stakeholder pressure. Revenue maximisation targets sales, penetration targets share, predation targets rivals, and skimming charges high initial prices.

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