Why are there different writing companies for different tiers?

[Tcollins]

This question is just coming from a place of curiosity. I'm hoping someone can help me to better understand.

When writing new business (whether its auto, or home, or a personal umbrella), insurance carriers often have different "writing companies" for different types of risk, different territories, etc.

For example, a personal auto policy with Progressive may be written with "Progressive Northern Insurance Co.", and another one might be written with "Progressive Specialty Insurance Co.".

Another example: let's say one client's home doesn't have all of the necessary updates within 20 years, so they don't qualify for the "elite" tier for a specific carrier. As a result, the "writing" company of this policy is different than the writing company for clients that are in that elite tier (even though both groups are insured by the same carrier). I'm hoping I'm making sense...

Does anybody know why these carriers have multiple writing companies? Is it for compliance reasons? Is it for administrative purposes so that the carrier is able to more effectively manage their clients and the types of risks profiles?

I would love to learn about why these insurance carriers have so many different writing companies and where this practice/system originated from. Thank you in advance for your help!

 

[1manshow]

Good way for them to introduce new, competitive programs to attract new clients without offering that same lower rate to existing blocks of business.

 

[Tcollins]

Good way for them to introduce new, competitive programs to attract new clients without offering that same lower rate to existing blocks of business.

So does it have to do with the rates each carrier has to file with the state?

I feel like me, the customer, wouldn't care if my auto policy is written with "Progressive Northern" or "Progressive Specialty", as long as I'm getting coverage.

 

[myfakename]

Its for rates/pricing. You can deviate only 40% in my state from filed rates. With different writing companies you adjust better...

 

[Markthebroker]

Basically the same reason I use my car for long trips and commuting, my 4x4 for 4wheeling and snow, my dirtbike offroad trails, and my hiking boots for all else.

Different vehicles for different scenarios.

 

[EugeneM]

Some "papers" are more competitive but have different/specific Undewriting guidelines. I notice the more competitive papers have a narrow appetite

 

[adjusterjack]

I would love to learn about why these insurance carriers have so many different writing companies and where this practice/system originated from. Thank you in advance for your help!

The why is because each company is its own profit center. Where the practice originated was back in the day when each company was a stand alone company that had its own specialty and reputation. Mergers and purchases put several companies under one roof but retained their individual identities (on paper) for marketing and profit allocation. There are probably many other reasons but you'd have to research the history of any particular insurance group of companies to learn about it.

 

[Tcollins]

Some really helpful explanations here... thank you everyone for contributing and helping shed light on these questions for me.