Complex Commercial: Time to Wake the Sleeping Giant? Michael Sauber, VP, Marketing | Jan 06, 2020

Analyzing Insurance Program Competition

In prior posts we discussed how easy access to capital and technology have lowered barriers to entry and created intense competition in the market. It’s an environment we call The Darwinian Economy.

Amidst this chaos, the program market continues to thrive. MGAs have taken the lead capitalizing on expertise in specific markets and the agent networks to access them. In fact, from 2010 to 2018, programs grew more than three times faster than the broader commercial market.1,2  

In this evolving market, there’s another segment worth watching. It’s many times larger than programs, and it shares some of the program market’s attributes. But it’s much more challenged. We call it Complex Commercial. As its name implies, on every level – markets served, products, underwriting, and distribution – it’s more complex than programs. And for many carriers and MGAs operating in this space, systems are the bottleneck preventing growth. (A topic we’ll cover in our next post.)

What Exactly is Complex Commercial?

Where program writers go deep, using market-specific knowledge and distribution, complex commercial writers go broad, appealing to multiple business classes in multiple geographies. The following table highlights the key similarities and differences:

Complex Commercial Faces Different Challenges

Each of the four dimensions in the table above, carries challenges specific to Complex Commercial. It falls to the Complex Commercial writer to apply the best-fit strategies and systems to overcome these.

Markets. Complex Commercial must appeal to many classes of business. This increases product complexity, as providers must offer and maintain all the coverages and rates required to compete in the broader market, including those for emerging risks such as cyber.

Products. Complex Commercial products are a mix of bureau (e.g. ISO, NCCI, AAIS) and custom content, using various adoption strategies with increasing sophistication (see sidebar). Adoption becomes even more complex when these strategies are mixed by line of business, or across multiple rating companies. With ISO updates becoming more frequent, product rates rules and forms must keep pace to remain competitive.

Underwriting. Underwriting is becoming more data driven as insurers tap into internal data sets and those offered by third parties. This creates more complex underwriting workflows and the need to adapt as new data becomes available3. The task is even more difficult for Complex Commercial underwriters, market generalists who must absorb data sets for many business classes.

Distribution. Broadly available capital, technology, and data have opened the market to new players and created short circuits in the value chain. These three forces have also shifted the locus of power closer to the point of sale4. MGAs and retail agents selling complex commercial must figure out how to take advantage of this new dynamic, while carriers must determine how to remain relevant.

Concluding Thoughts

With the insurance market undergoing change at a pace never before seen, the ability to adapt quickly is critical. For Complex Commercial writers, the challenges are compounded. But complex products, bureau adoption, underwriting, and distribution can be tamed with right technology. In our next post, we’ll highlight the essential system attributes used by the most successful Complex Commercial insurers.

2 The TMPAA State of the Program Business Study 2019. Target Markets. October 2019.
3 Dwyer, Katie. 3 Trends That Will Disrupt the Insurance Industry in the Next Decade. Risk and February 6, 2019.
4 Sclafane, Susanne. Distribution Overpowers Underwriting. Insurance Journal. June 1, 2018.

Mike Sauber joined Instec in 2016, with over 30 years of experience in technology marketing and sales. Mike has led global marketing teams and programs at IBM, Unisys, and Data General, among others, and prior to Instec was a member of the teams that launched two new enterprise software ventures. His deep technology industry experience includes software, servers, printers, and services, with an exclusive focus on the insurance industry since 2011. Mike holds an MBA from the University of Pennsylvania (The Wharton School), and a BES (Architecture) from the University of Waterloo.