Meghan and John here again to talk about what to think about when competing in the commercial line landscape.
In our last video, we talked about user experience and now we want to talk a little bit about price. Price has always been important in competing, but I think in today’s day and age it is becoming more and more critical.
We have the increased reinsurance; we have weather activity that we have never seen before, and we have inflation that I think is also a bit unprecedented. This is the fourth year in a row of hardening commercial lines market, and it means price is more critical than ever to address loss ratio pressure that arises from everything I just listed as well as just performance itself.
Given this increased pressure on loss ratio that we’re seeing, how should carriers think about reaction? I think the first place most folks go to is base rate. If you’re feeling profit pressure, that’s usually the quick reaction.
And oftentimes that is the right reaction. I think in this market there’s need for base rate, with all the pressure we’ve had over multiple years, particularly in the property space. However, a lot of the national carriers won’t jump to base rate right away. They’ll go to segmentation changes. And if they’re making segmentation changes, improving what’s being used in segmentation or how they’re applying their rate, that’s going to make it more and more of a challenge for other carriers to compete in that space.
Making sure that your book of business is being priced appropriately, not just across a whole peanut butter approach, but with more of a scalpel approach in finding the business that needs it. There are different ways to do this, right, whether it’s on territory, class, financial stress scores, that type of thing. All of that is being looked at by the large national carriers and they’re applying rate to the types of business that need it most.
Making sure you’re doing the same is critical. If a lot of times that data doesn’t exist on the internal book. How do you understand what’s out there and being used is critical. Looking at competitors, what they’re using and third-party data vendor is what’s kind of new in the market or what’s been there and being most utilized by other carriers.
John, that’s a lot. I think it’s all great, but it can be overwhelming. Where do you start? Megan, that’s a great question. I think we need a full video for that one.