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It is a time-honored practice in insurance ratemaking for insurers to study their competitors’ rates. And, because of rate regulation, competitors’ price information is a matter of public record.

By maintaining awareness of rate activity, an insurer can identify opportunities to achieve competitive advantage by balancing the actuarial component of its rates with knowledge of the market position. For many companies, the filings of leading insurers provide a view of pricing innovations and more-sophisticated rate structures.

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.

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