The Hartford 2012 Annual Report Download - page 8

Table of Contents
Competition
The personal lines automobile and homeowners businesses are highly competitive. Personal lines insurance is written by insurance companies of varying sizes
that compete on the basis of price, product, service (including claims handling), stability of the insurer and brand recognition. Companies with recognized
brands, direct sales capability and economies of scale will have a competitive advantage. In recent years, a number of carriers have increased their advertising
in an effort to gain new business and retain profitable business. This has been particularly true of carriers that sell directly to the consumer. Industry sales of
personal lines insurance direct to the consumer have been growing faster than sales through agents, particularly for auto insurance.
Carriers that distribute products mainly through agents compete by offering agents commissions and additional incentives to attract new business. To
distinguish themselves in the marketplace, top tier carriers are offering on-line and self service capabilities to agents and consumers. More agents have been
using “comparative rater” tools that allow the agent to compare premium quotes among several insurance companies. The use of comparative rater tools has
further increased price competition. Carriers with more efficient cost structures will have an advantage in competing for new business through price.
The use of data mining and predictive modeling is used by more and more carriers to target the most profitable business and carriers have further segmented
their pricing plans to expand market share in what they believe to be the most profitable segments. Some companies, including The Hartford, have written a
greater percentage of their new business in preferred market segments which tend to have better loss experience but also lower average premiums. In addition, a
number of companies have invested in telematics — the use of devices in insured vehicles to transmit information about driving behavior such as miles
driven, speed, acceleration, deceleration — and are using that information to price the risk. Companies that are the first to introduce telematics may enjoy a
competitive advantage through favorable risk selection.
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Principal Products and Services
Group Benefits provides group life, accident and disability coverage, group retiree health and voluntary benefits to individual members of employer groups,
associations, affinity groups and financial institutions. Group Benefits offers disability underwriting, administration, claims processing and reinsurance to
other insurers and self-funded employer plans. Policies sold in this segment are generally term insurance, allowing Group Benefits to adjust the rates or terms
of its policies in order to minimize the adverse effect of market trends, declining interest rates, and other factors. Policies are typically sold with one, two or
three-year rate guarantees depending upon the product.
In addition to the products and services traditionally offered within each of its lines of business, Group Benefits offers The Hartford Productivity Advantage
(“THPA”), a single-company solution for leave management, integrating work absence data from the insurer’s short-term and long-term group disability and
workers’ compensation insurance with its leave management administration services.
Marketing and Distribution
The Group Benefits distribution network includes an experienced group of Company employees, managed through a regional sales office system, to distribute
its group insurance products and services through a variety of distribution outlets including brokers, consultants, third-party administrators and trade
associations.
Competition
Group Benefits competes with numerous other insurance companies and other financial intermediaries marketing insurance products. This line of business
focuses on both its risk management expertise and economies of scale to derive a competitive advantage. Competitive factors affecting Group Benefits include
the variety and quality of products and services offered, the price quoted for coverage and services, the Company’s relationships with its third-party
distributors, and the quality of customer service. In addition, active price competition continues in the marketplace resulting in multi-year rate guarantees being
offered to customers. Top tier carriers in the marketplace also offer on-line and self service capabilities to agents and consumers. The relatively large size and
underwriting capacity of the Group Benefits business provides opportunities not available to smaller companies.
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