There is no doubt that the competitive landscape in the North American personal lines insurance market is changing. The market is the most competitive it has ever been and growing market share seems to be a top priority for many carriers. This trend has resulted in the willingness of companies to price policies aggressively to attract and retain more business. Analyzing the competition is critical in understanding the ever changing market. With the proliferation of digital channels, mobile internet, and aggressive advertising we are seeing an acceleration of more aggressive and complex rate changes.

Over a decade ago, I began my career in insurance pricing by reading through company rate filings and summarizing the changes. Most companies followed a pretty typical pattern where every year they would do basic factor updates (driver class, deductibles, etc.) and every few years they might introduce a new rating element such as a new discount. Now, companies are continuously rolling out new programs with vastly increased complexity – it almost feels like an arms-race to see who can have the most complex rating plan.

Over the past few years, we have seen the role of the competitive analyst change from primarily clerical work to professional level analysis. The complexity of some companies’ rating structures has increased to the point where deciphering the rates is nearly impossible. Today when an analyst receives the seemingly simple question “what is the multi-policy discount for our top five competitors” it could take an entire day or longer to compile the information in a meaningful way. So who is actually doing this work?

In a recent survey of North American insurance companies on the use of competitive intelligence, nearly half of the respondents reported having dedicated competitive analysis teams with an average size of four full time employees. Not surprising, the large companies are more likely to have dedicated teams.




These competitive analysis teams are continuing to grow and evolve. With the increased complexity of competitors’ rating plans, companies are adapting their toolset for comparing premiums. A decade ago, a company could maintain its competitors’ rates in a basic Excel workbook. Each time a company changed rates, the workbook would be updated with the new factors. These days are gone (or at least quickly disappearing). Insurers are now relying more heavily on competitive rating tools. 87% of the companies surveyed cite using vendors to acquire/calculate premiums for their competition.




Unfortunately, these tools are not without their own complexities. In many cases, companies do not have the relevant policy information to populate these tools and broad assumptions must be made (e.g. credit, underwriting, telematics). Some companies save time and energy by just making simplified assumptions, while others invest significantly to perfect these assumptions and produce the most accurate competitive analysis possible. In order to maintain or improve the accuracy of these assumptions, half of companies foresee increasing their investment in competitive analytics over the next 12 months.




Today, roughly half of the companies surveyed are highly confident in the accuracy of their calculated competitors’ rates; however, It is difficult to pinpoint where further refining assumptions has a diminishing return on investment. This leaves some business partners questioning “what is the business value derived from having slightly accurate competitor prices?”

The reality is that it is difficult to quantify the return on investment for competitive analysis. This anticipated investment is being driven by the frequency and complexity at which companies are changing rates in addition to the overall competitiveness within the market. However, I personally question if trying to more accurately capture competitive information is actually the best investment.

Today, nearly all companies are using competitive rate analysis to gauge their competitiveness – presumably both on an overall and by segment level.




Companies go to great lengths to quantify their competitive position so they can better identify customer segments where they are more or less competitive, thus knowing where they are more or less successful in writing or retaining customers. Majority of companies then use this information as the primary metric guiding the deviation from loss cost. However, is this really the best metric to manage to?

For example, if there is a business segment that is grossly uncompetitive, but the segment is reasonably profitable, has excellent retention, and slightly above average new business conversion. Pulling the pricing lever for this segment based on competitive position would be a mistake. If we have an excellent understanding of profitability, retention, and new business conversion, shouldn’t this deemphasize the importance of competitive rate analysis?

Over the next decade rating plans are going to continue to grow in complexity. This will force companies to manage their competitive intelligence process differently. Some companies will continue increasing the investments in an attempt to accurately model competitor premiums. However, I foresee some companies shedding the reliance on competitor premiums and instead investing in intimately understanding their own retention and conversion rates.
Whatever the strategy, companies should understand what value they hope to gain from their competitive analysis efforts now and in the future. Below you will find a link to the complete survey results. These insights should provide you a better idea of where your current competitive analysis stacks up and where you are hoping to take it in the future.

Get the complete results of the survey or view the infographic. Join me at CAS RPM next week (March 16, 9:30pm -10:45pm) where I will delve deeper into competitive analysis for the modern insurer.