Insights.
LTV / CAC as a measure of value generated.
An actuarial viewpoint.
LTV / CAC or other similar measures are increasingly being used in the insurance industry as a measure of value generated, especially among the insurtechs. We applaud this move to a substantially more sophisticated measure, but also note some downsides.
Executive Summary: The LTV / CAC measure is common among SaaS, but has additional complications when applied to insurance products, including different switching mechanisms and customer dynamics. While the measure demonstrates value much better than loss ratio, we model some of the complexities that make its use tricky and potentially misleading.
Actuarial issues from a director’s perspective.
A process for non-actuaries dealing with technical actuarial issues; intended for use by a (Board) Director or investor, who is evaluating a balance sheet and income statement for a troubled company, without technical training on actuarial issues. Note: There is the SHORT version for general info. A LONG version, which includes some calcs and will require extracting/constructing basic exhibits using company financials, is also available. For both versions, see LINKS below.
Adage: By the time an insurance company admits it has problems, it usually has more problems than it can admit to.
Providing additional insight into your business is what we do best.