Insurers Should Get The Facts On Urban Markets
One of the classic knocks against insurance companies is that they have been blind to the opportunities present in inner-city markets. Charges of "redlining" have been leveled against selected carriers over the years, lawsuits have been filed, and some settlements reached that impose demands on carriers to be more aggressive, open-minded and flexible in urban areas.
One theory cited by critics to explain the reluctance on the part of some insurers to write in inner cities is that they are simply ignorant of the opportunities, suggesting that looking at the facts would encourage carriers to do more business in urban areas.
A number of years ago, some carriers tried to offset this perception by organizing a bus tour to take underwriters into inner-city areas to see flourishing urban businesses and homeowner communities eager to be insured. This only served to confirm the worst fears of criticsthat insurers dont know anything about inner cities and had to resort to a bus tour to see that urban areas were not as "bad" as underwriters might have thought.
Now this alleged ignorance is about to be challenged yet again. MetroEdge, a Chicago-based market research and consulting division of ShoreBank, says a lack of accurate database tools is costing insurers billions of dollars in missed urban business. Indeed, the company says its recent analysis of low-, middle- and high-income market segments shows that each group generates about the same amount of annual consumer expendituresabout $1 trillion each.
"Traditional segmentation tools that attempt to size the market and identify distinct customer preferences have limited use in urban markets," said Darice Wright, director of financial services for MetroEdge. "Most database services will have three to four market segments for urban markets, whereas companies really need at least a dozen segmentations to market efficiently."
MetroEdge is scheduled to detail its findings in Chicago at the third national Urban Insurance Advantage workshop on Oct. 28-29.
The workshop–organized by the Urban Insurance Partners Instituteis designed to provide life, personal lines and commercial lines insurers with the tools and data they need to compete successfully in the urban marketplace, the group says. UIPI is a non-profit educational organization supported by the insurance industry that conducts annual workshops for insurers, as well as promotes consumer education on homeowners and commercial coverage.
This weeks cover story, an exclusive report by MarketStance detailing the type of an approach that can be used to simplify the task of marketing commerical insurance to minority-owned businesses, gives insurers yet another source of information.
Insurance is an information business. The industry depends on the scope and reliability of its data for every decision made by underwriters, not only on individual submissions, but in entire product lines and geographic areas.
Insurers should pay close attention to the MetroEdge study. Every additional bit of information that could help the industry overcome any remaining phobias about writing in the inner cities should be welcomed. At the very least, the findings should spur a dialogue and followup studies by individual carriers to make sure no potentially profitable business is being rejected out of hand because of blind prejudice.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, October 17, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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