| Company | Scale | Network | Counter-pos. | Switching | Brand | Cornered res. | Process | Total |
|---|---|---|---|---|---|---|---|---|
| Chubb & Travelers | ◐ | ⭘ | ⭘ | ◐ | ◐ | ⭘ | ⬤ | 5 |
| Allstate | ◐ | ⭘ | ⭘ | ⭘ | ⬤ | ⭘ | ⬤ | 5 |
| Aon & Marsh | ◐ | ⭘ | ⭘ | ⬤ | ◐ | ◐ | ⬤ | 7 |
| Verisk | ⬤ | ⬤ | ◐ | ⬤ | ◐ | ⬤ | ⬤ | 12 |
| Lloyd’s of London (market) | ⭘ | ◐ | ⭘ | ◐ | ⬤ | ◐ | ◐ | 6 |
| Swiss Re & Munich Re | ◐ | ⭘ | ⭘ | ◐ | ◐ | ⭘ | ⬤ | 5 |
7 Powers
notes
insurance
llm
Helmer’s 7 powers for the insurance industry.
The Acquired podcast ends each episode with an analysis of the seven powers, from Hamilton Helmer’s book 7 Powers: The Foundations of Business Strategy.
Helmer says a Power is about enduring differential returns, not growth, not “being good,” and not a temporary edge, whereas Strategy is about how you build and defend at least one power and everything else is support.
I wondered how the 7 powers apply to the insurance industry and asked GPT. Analysis seems reasonable. Unsurprisingly, not many stand-out powers in insurance!
The Seven Powers
Helmer’s seven powers are: scale economies, network economies, switching costs, branding, cornered resource, process power, and counter-positioning (SNS-BCPC).
scale economies: Unit cost falls as you grow, so the leader can price lower (or earn higher margins) and still win. Works best when fixed costs are big, variable costs are small, and you can serve customers broadly from the same asset base (software, logistics networks, fabs, etc.).
network economies: The product gets more valuable as more people use it, so the winner attracts even more users. Usually strongest in two-sided networks (buyers/sellers, riders/drivers) or when compatibility and standards matter.
switching costs: Once a customer adopts you, it is painful to leave: integration, retraining, data migration, workflow disruption, risk, contractual lock-in. This creates pricing power and low churn even if rivals look similar.
branding: A durable association in the customer’s mind that lets you charge more (or be chosen more often) for what is otherwise similar. It is not “marketing spend”; it is trust, identity, and reduced perceived risk, built over time and protected by consistency.
cornered resource: You control some scarce asset that others cannot get on comparable terms: a patent, exclusive supply, unique data, a distribution channel, a key partnership, regulatory license, talent cluster, or a location.
process power: A persistent advantage from the way you do things: culture, routines, know-how, systems, and feedback loops that competitors find hard to copy. It looks like “execution,” but the point is durability: the process compounds and survives turnover.
counter-positioning: A new entrant can adopt a business model that the incumbent cannot copy without seriously damaging its existing business. The incumbent is not unaware or slow; it’s that copying would cannibalize its cash flows, pricing, brand, or internal incentives so it rationally chooses not to respond giving the entrant time to scale and entrench.
Insurance Industry Analysis
Travelers / Chubb
Large P&C insurers.
Scale economies Weak to moderate. There are scale effects in expense ratio, reinsurance access, data, and regulatory overhead, but pricing is local, lines are heterogeneous, and capital is not strongly indivisible. Scale helps, but it does not lock out competitors.
Network economies None. Policyholders do not benefit from other policyholders being there.
Switching costs Moderate but limited. Commercial insureds face friction (broker relationships, underwriting data, continuity concerns), but switching is routine at renewal. This is not SaaS-level lock-in.
Branding Moderate. Chubb especially benefits from brand in large commercial and HNW lines (trust, claims handling, counterparty strength). This supports selection, not strong pricing power in soft markets.
Cornered resource Historically underwriting talent and relationships, but not truly cornered. No exclusive access to capital, licenses, or distribution.
Process power This is the real one. Durable underwriting culture, decentralized authority, long feedback loops, and discipline through cycles. Hard to copy, slow to erode, but also slow to monetize aggressively.
Counter-positioning Very weak. The business models are too similar. Nobody is structurally blocked from copying the other without self-harm.
Net: Travelers/Chubb have one real power (process), supported by some brand. Returns persist mainly because many competitors lack discipline, not because entry is blocked.
Allstate
(personal lines focus)
Scale economies Moderate to strong. Personal auto and home have real fixed-cost scale: advertising, call centers, claims platforms, pricing models. Unit costs fall with volume more than in commercial lines.
Network economies None.
Switching costs Low. Customers can switch every renewal; price shopping is routine. Telematics nudges this up slightly but not dramatically.
Branding Strongest power here. Allstate’s brand signals claims reliability and financial strength. This supports retention and some price premium, but it erodes quickly in hard price competition.
Cornered resource None durable.
Process power Strong. Claims handling, fraud detection, pricing discipline, and marketing optimization. Competitors may copy products faster than in specialty commercial lines through filings.
Counter-positioning Weak. Direct vs agent models used to matter more; now everyone mixes.
Net: Allstate’s advantage is process, scale + brand in a brutally competitive market with low switching costs. Power is thinner than it looks from the outside.
Aon / Marsh
(distribution side)
Scale economies Moderate. Scale helps with global accounts, compliance, analytics, and insurer access, but does not collapse unit costs the way software does.
Network economies Weak. Insurers want access to brokers with business; clients want broker access to insurers. This is more bargaining leverage than true network effects.
Switching costs Strongest power here. Client relationships, embedded risk knowledge, service teams, and inertia create real friction. Not absolute, but meaningfully stronger than carriers enjoy.
Branding Moderate. Matters most for large multinationals and complex risks.
Cornered resource Sometimes. Exclusive facilities, delegated authority programs, or proprietary placements can look like this, but they are fragile.
Process power Yes. Relationship management, placement expertise, and organizational routines matter and persist.
Counter-positioning Limited. Fee transparency pressures create some tension, but incumbents generally can adapt.
Net: Brokers have stronger switching costs than carriers and decent process power. That’s why value pools have drifted toward distribution over time.
Verisk
(technical / data services)
Scale economies Strong. Fixed costs of data collection, standardization, and analytics are enormous; marginal cost is tiny.
Network economies Strong. More contributors → better data → better models → more users. Classic data flywheel.
Switching costs Very strong. Embedded workflows, regulatory filings, historical continuity, and comparability make exit painful.
Branding Moderate but reinforcing. “Industry standard” status reduces perceived risk.
Cornered resource Yes. Proprietary datasets, contributor agreements, historical depth that cannot be recreated.
Process power Yes. Data governance, model validation, and institutional memory.
Counter-positioning Yes. Many incumbents (carriers, bureaus) cannot replicate Verisk internally without undermining shared-data norms or incurring massive coordination costs.
Net: Verisk is the cleanest example of multiple reinforcing powers in insurance. That’s why margins and durability look very different from carriers.
Lloyd’s of London
(marketplace, not a balance sheet)
Scale economies Weak. Lloyd’s does not pool capital the way a single reinsurer does.
Network economies Moderate. The marketplace matters: brokers, syndicates, coverholders, and specialty risks co-locate. This is a matching and information network, not a volume network.
Switching costs Moderate for certain specialty risks (reputation, underwriting continuity), low elsewhere.
Branding Strong in niches. “Lloyd’s paper” still carries weight for unusual, complex, or bespoke risks.
Cornered resource Yes, but narrow: licenses, global admitted status, historical franchise in specialty lines.
Process power Mixed. Individual syndicates can have strong process power; the market as a whole is uneven.
Counter-positioning None at the market level.
Net: Lloyd’s power is institutional and reputational, strongest where standard reinsurers do not want to play. It is not a scale machine.
Swiss Re and Munich Re
(balance-sheet reinsurers; very similar strategically)
Scale economies Moderate. Capital diversification, global platforms, and analytics scale help, but capital is still contestable.
Network economies Weak. Cedants do not benefit from other cedants being present.
Switching costs Low to moderate. Relationships matter, but panels are refreshed frequently.
Branding Moderate. Signals claims-paying ability, longevity, and sophistication.
Cornered resource Historically data and research depth, but this is eroding as analytics commoditize.
Process power Strong. Risk selection, portfolio construction, capital allocation, and cycle discipline. This is the core advantage.
Counter-positioning Weak. Swiss Re and Munich Re can copy each other without self-harm.
Net: Like top primary carriers, elite reinsurers live on process power and discipline, not structural lock-in.
Summary
Financials
| Symbol | Market Cap | Forward P/E | Price to Book | Revenue YoY | Profit Margin | Return on Equity | Return on Assets | Net Inc / Eee | LTD to TC |
|---|---|---|---|---|---|---|---|---|---|
| CB | 119.44 | 12.58 | 1.67 | 7.4% | 29.0% | 13.6% | 3.6% | 225.00 | 17.0% |
| TRV | 61.27 | 10.36 | 1.86 | 5.2% | 29.4% | 20.7% | 4.4% | 209.60 | 21.3% |
| ALL | 51.29 | 6.50 | 2.01 | 7.1% | 28.2% | 34.5% | 7.0% | 151.78 | 21.0% |
| AON | 72.84 | 19.97 | 9.19 | 14.1% | 46.8% | 37.7% | 5.3% | 45.30 | 60.8% |
| MRSH | 89.98 | 19.12 | 5.94 | 10.5% | 44.0% | 28.7% | 7.0% | 45.86 | 53.9% |
| VRSK | 30.63 | 31.68 | 81.30 | 7.3% | 69.6% | 268.1% | 14.8% | 118.14 | 64.1% |
| PGR | 121.97 | 11.53 | 3.44 | 18.4% | 17.9% | 34.2% | 8.8% | 161.56 | 16.3% |