Guidewire TL
Follow Us



Are Carriers Ready for the Coming Crash?

Eye of the Storm: Natural disasters, the insurtech market, and other musings from Bob Frady, CEO of HazardHub


There’s a crash coming to the personal – and small commercial – lines worlds. It could shake the very foundation of how carriers both measure and accept risk. Unfortunately, it seems like most carriers are not prepared for what’s about to happen.

The crash isn’t about the economy, nor is it about the collapse of the insurance market. But it is a collapse of one of the fundamental aspects associated with data acquisition and risk assessment.

The crash we talking about is already starting to happen in places like Florida and Texas – two of the largest insurance markets in the U.S.

The crash is – of course – the crash in quote-to-bind ratios. What was once a cozy “five quotes to one bind” ratio will plummet to anywhere between 30-1 and 100-1 or worse. It’s a change for which most carriers are woefully unprepared.

The culprit? Comparative raters.

While we don’t have a true “Expedia” of the insurance market in the U.S., that day is coming sooner rather than later. When quotes are quickly generated and placed side by side – and when insurance becomes bought rather than sold -- quote-to-bind ratios plummet.

There are two huge impacts for carriers for this coming crash.

First, carriers will need to generate quotes almost instantaneously. The purchaser will provide little to no information beyond an address and possibly their name. Carriers will need to do the heavy lifting to fill in the data needed to accurately quote a policy. A few carriers have already responded by pre-rating every address in their service territory. It’s a huge, expensive task but pays dividends by providing lightning-fast quotes.

Second, carriers will get zone-level (ZIP code, rating territory, etc.) inaccuracies exposed almost instantly. Any zone that has the wrong price will result in either losing good business because the price is too high, or getting adversely selected because the price is too low. If you’re not writing either on micro-segments or individual property characterizes and risks, your mistakes will get instantly exposed and abused with a comparative rater.

Both of these issues can be overcome on the carrier side with the right effort, but there’s one problem: The data provided by the incumbent “data beasts” in the insurance industry needed to both prefill an application and price it properly are priced using the old 5-1 quote-to-bind ratio. So, when your close ratios drop through the floor, your data costs will explode. They’ll get rich and you’ll end up eating the cost. Alternatively, you can drop the risk data from your quoting process and only use it on the bind; but by that time, the horse is already out of the barn.

The key is to find data that scales with your needs, so you don’t end up paying an eye-watering amount in third-party data costs. It should cost you pennies to learn about a property, then more when you successfully bring home a customer.

Prospects will sometimes ask, “Why do you charge so little when the other guys charge so much?” At which point we know that carrier is not prepared for the crash. Carriers that choose to stay with the high-priced competitor (and their uniformly worse data) just don’t see the quote-to-bind crash coming and that their “Cadillac” approach just doesn’t scale.

The crash is coming. Are you ready?

Featured articles




The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.


April 5th – 7th, 2020
The Diplomat Resort
Hollywood, FL
Become a member today to receive updates –


only online

Only Online Archive

ITA Pro Buyers' Guide

Vendor Views

Partner News