The Perils Of Copycat Ratemaking

Since the early 1990s, when new data and analytical-ratemaking techniques were introduced to personal-lines insurance, increased pricing sophistication among leading carriers has created a growing divide between the technological “haves” and “have nots.” Many lagging insurers are trying to bridge the gap by copying the rate structures of leading carriers, resulting in an explosion of copycat ratemaking.

It’s easy to understand why an insurer with a less-sophisticated rate structure might see imitation ratemaking as a convenient solution. To develop its own pricing enhancements, a company requires significant resources, including data sources and analytical expertise that the insurer may not have.