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Five Competitive Forces in the Insurance Industry

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Five Competitive Forces Analysis in the Insurance Industry

RichardSmith

Managerial Economics
December 6, 2013

Industry Insurance is something that is needed by everyone today. It is used by individuals, business, corporations, etc. to help mitigate or minimize their financial risk. Various types of insurance exist today, from home, health, life, auto, travelers, indemnity, boat, renters, and even pet. Competition between insurance carriers is very stiff. In fact, in the United Kingdom (UK), the competition is so stringent, they have created a Competition Commission (CC), which is designed to ensure healthy competition between insurance companies in the UK for the ultimate benefit of the consumers and the economy ("Competition Commission GOV.UK."01).
Many insurance companies have gotten caught up in having an unbalanced pool of insurers because they were not prepared and did not do their homework. The have to be very careful in their underwriting process to ensure they insure the most desirable individuals. Many insurance companies have learned quickly the value in the knowledge and power of information obtained from doing research and the huge financial risk associated with getting stuck with a poor unbalanced pool of insured. Therefore, many insurance companies today are utilizing various tools and setting themselves apart from the competition via the competitive forces in an effort to avoid the financial repercussions associated with not being prepared. That way, they are avoiding the unprofitable pool if risk levels are miscalculated.
Participants and Segmentation of Insurance Groups There are several participants in the insurance industry. The primary participant is the consumer. Without someone to purchase insurance, this industry would not exist. However, customers are not just purchasing insurance at random; rather, they are purchasing

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