Retention Tier Analysis

Overall renewal retention rate is one of the most frequently cited metrics in P&C insurance. It is also one of the most easily misread.

An overall retention rate of eighty-five percent can reflect a very healthy portfolio or a deeply troubled one, depending on which eighty-five percent you are retaining. A carrier that is retaining its worst risks and losing its best to sharper-priced competitors is experiencing adverse selection in slow motion, and the overall retention headline will not tell you that story.

The metric that tells the more useful story is retention rate stratified by risk quality tier. If your best-performing accounts are renewing at higher rates than your worst-performing ones, your portfolio is improving. If the inverse is true, you have an adverse selection dynamic that needs to be addressed at the pricing or service level, not at the retention rate headline.

Building that segmented view requires policy administration data quality that not every carrier has. Building it is worth the investment precisely because it reveals what the headline number hides.