To Quadrant Information Services Founder and Chief Executive Officer Michael Macauley, InsureWatch Looking Glass is the ultimate marketplace weapon. The cloud-based pricing tool assembles property/casualty industry data and uses it to predict competitors’ future pricing strategies.
Executive SummaryQuadrant CEO Michael Macauley explains the basics of his firm’s new pricing analytics product, InsureWatch Looking Glass.
“I know your next rate change before you make it,” Macauley said he tells prospective insurance industry clients. “They don’t believe that I can do that, and yet I show them. I prove to them that that is actually done, and I think it scares them a little.”
After two years of pilot testing in a soft launch with a few customers, Quadrant formally unveiled Looking Glass this year.
The technology is the latest advance for California-based Quadrant, which has assembled data from the P/C insurance industry since 1991 in order to help clients calculate rates.
About 150 people work for the company, which has “several hundred” customers including large companies like Allstate, State Auto and smaller carriers as well.
Recently, Macauley spoke with Carrier Management about his company, InsureWatch Looking Glass, and why pricing is both elemental and extremely important to the insurance industry. Highlights from the conversation are included below.
Q: What does Quadrant do?
Macauley: Quadrant is a company that assembles data from across the property/casualty business. There’s 15,000-20,000 [auto and homeowners] rates within the system [in the U.S.] With that, carriers can apply millions of iterations to policies across companies to give great big comparisons.
We can find out that you are priced adequately or not adequately, but in doing so, the consumer gets [fairer] treatment because you can see the pricing. If you’re priced too high, [the consumer] can definitely find somebody that’s going to be priced better.
Q: Describe InsureWatch and what it does?
Macauley: InsureWatch, a product that precedes InsureWatch Looking Glass, is maybe four years old now. It came about in the era of the cloud [and] allows us to review the data that used to be contained on computers or servers locally. The cloud-based application allows us to review data the client wants to see and do a lot of the hard work for them.
Q: What is InsureWatch Looking Glass?
Macauley: Looking Glass is an add-on function of InsureWatch that incorporates historical, current and projected future rates.
Because we capture data going back to 2003, we’re able to identify the history of rates for every single company with Looking Glass. While there’s more significance than just trending, when it comes to historical rates, it shows a trend line. I can apply algorithms to the trend… I can then identify what’s the next rate change or what the future rate changes would be.
Q: When did this launch?
Macauley: [Looking Glass] has been out for two years. We’ve had two clients that have had output from it for a couple of years. We launched the product [formally], I would say, within the last six months. We did a pilot—a prototype. These companies were able to see the results of Looking Glass, and with the results being satisfactory, we then decided to launch the full-blown product to the rest of the clients out there.
Q: Why is it important to anticipate competitors’ pricing strategies?
Macauley: It’s like Coke or Pepsi. If you know what Coke or Pepsi’s price is going to be, you can anticipate that and react to it in advance. To be a competitor in insurance, the next pricing Mecca, I can anticipate that and beat them. It’s critical, I think, in pricing—particularly in a commoditized business like insurance—to know what the guy’s going to do because of his losses or because of his reaction to the marketplace. To know that in advance is a huge advantage.
Q: Why is this so critical?
Macauley: In the past, this has been really just a guessing game. [Looking Glass] is not guessing. This is actually computer-based and sound. It tells you exactly what the [competition is]. An example of that would be, because we have historical rates, I can take the last, say, three years of rate changes and apply the Looking Glass. Don’t do it on the third year, but do it on the first two years, and then do it for the third year.
I have a Looking Glass example on the third year, then compare that against the actual rate change, and I can see exactly that Looking Glass knew what to do.
Q: In using this technology, are there legal or privacy issues in sifting through this much data?
Number of Employees: 150
Founder and CEO: Michael Macauley
Products: Pricing tools that assemble and assess P/C insurance data.
Macauley: The rates are filed publicly. We apply an algorithm to predicting the next rate change. The only thing proprietary would be identifying the algorithm and which one we applied. There’s nothing really secretive about this at all.
Q: Keeping this system on the cloud, is it safe from cyber hacking or other kinds of cyber interference?
Macauley: It’s protected as much as the cloud can protect anything. Luckily, we don’t have to deal with bank logins and passwords. The proprietary nature of this is probably the most secretive thing we have, but getting access to the data itself wouldn’t necessarily mean anything if somebody was to get to it.
Q: How is the insurance industry responding to Looking Glass?
Macauley: The insurance companies have embraced it. They’ve agreed with the idea. Some have taken on the project.
Q: Can you elaborate on the predictive ability?
Macauley: If you look at an insurance company, no insurance company is really making any big changes. They’re just making small, incremental changes that are easily enough predicted. Over the years, you’ve seen companies invent these wild and crazy new algorithms, but they’re nothing secretive. There’s nothing great about them. Probably the company that tries this the most is Progressive. They’ve thrown me a curve ball once in a while, but they haven’t foiled me yet.
They’re moving on a marketplace that expects them to be pretty much the same year after year after year. You can’t make any big changes, and therefore the prediction of the future is fairly easy.
Q: What is your perspective on technology vs. the insurance industry?
Macauley: I started the company in 1991, after working as a VP for a California-based P/C sales tool company. We’ve seen a lot change over 25 years. Territories, and all kinds of algorithms, but primarily auto insurance or homeowners insurance is the same as it was back in 1991.