Product portfolio management for the UK motor insurance industry : a study in game theory perspective

• Main Author: Gunnels Porter, Sarah
• Published: University of Warwick 2016
• Subjects: 332.6; HG Finance
• Online Access: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.723105

Product Portfolio Management is a complex strategy development process with mechanisms for evaluating market dynamics and competition; however none provide the managerial insight into competitive response required to stay one step ahead in the market. This research uses Game Theory as a tool to tackle and give perspective to a case study in the UK Motor Insurance Industry. The case study focuses on Endsleigh and Zurich Insurance products presented on aggregator websites. To enable efficient modelling the players and portfolios were reduced through competitive strategic grouping and strategy analysis. Player utilities were generated through a customer survey and manipulation of known Product Portfolio utility optimisation functions. Finally, the model was analysed to find the Nash Equilibrium using a non-linear optimisation model written with parallel quadratic programming based on a quasi-Newton technique. The Game Theory model of this highly competitive market provided valuable feedback into the market dynamics and competitive responses to product strategy decisions. When presented to the case companies it was expressed that the model provided market insights that would allow the company to preempt the market, reducing rework in product development and strategic decisions, and create a competitive advantage. Furthermore, when presented to the government regulatory body, they expressed interest in the model for the purpose of developing better regulations to control market dynamics in support of maximising market potential while protecting customer interests. Overall, the Game Theory model proved useful as a tool for evaluating the case study given the insights it provided, above and beyond alternate Product Portfolio analysis tools, into market dynamic, competitive response and customer behaviour.