How to Compete within an Oligopoly
Categories: New Business Models, How-To's, Title Insurance
Ed at Title-opoly
sees how the title insurance industry operates as a classic oligopoly
(the name of his blog is literal) - five major title insurers underwrite 92% of the title insurance in the US. Ed has authored a number of related articles in his post Oligopoly and reminded me of Oligopoly Watch, a blog dedicated to reporting and clarifying oligopolies across a variety of industries.
Here's an intriguing article written by Dan Scheuble, currently the President of Fidelity subsidiary FNIS's Mortgage Processing Services Division, but printed in 2004 when he was CIO of Fidelity National Financial: Is an Oligopoly Good or Bad? Note the article is not about the title industry, Scheuble is discussing the lender oligopoly.
Here's the point: although written three years ago, the article is applicable to the title industry today. Scheuble is, for practical business purposes, an oligopoly expert... having worked in one oligopoly, he applied his observations to another one, the mortgage industry.
He discusses how players in an oligopoly differentiate themselves... I added the column for today's title insurance industry environment.
| How to differentiate within an oligopoly | Loan origination industry (2004) | Title Insurance industry (2007) |
| Differentiation based on processing speed | Loan originators that process faster get more business | First American offers TitleSmart for instant prelim qualification |
| Monitor competitors' innovations to stay a step ahead in protecting turf | Creation of new product lines - i.e., subprime loans, and new product features - i.e. online origination | Title insurance companies racing to offer AVM and other consumer facing products |
| Collaborate in development of industry
standards - after all, oligopoly can "fix" costs of collaborative
development so pricing is uniform across competitors. |
in 2004, focus on "web services" to deliver front end applications to the consumer | in 2007, focus on web 2.0 as the
definitive standard to deliver front end applications to the consumer.
(Note, title insurance rates are still fairly uniform across
competitors) |
In
tomorrow's article, I will describe the paradigm shift happening in
consumer marketing and how Fidelity Title and their oligopolistic
brethren are all in a race to change their business models to develop
relationships with the consumer... and it's not by placing television
advertising.
Technorati Tags:
title insurance, lenders, oligopoly, titleopoly, business strategy, competition, Fidelity
Pat
Thanks for the mention. Your statement concerning the title industry's dislike of traditional mass media is interesting. I feel strongly that both of the disenfranchised factions within the industry, title insurers and title agents, could benefit from properly placed tv advertising. Title insurers run the possibility of a negative backlash from consumer groups and may never take the risk. Title agents lack the unity and cohesion to mount an appreciable effort. Neither group has a clue about transparency.
2007 holds the promise of pivotal and permanent changes to time tested models in the RE industry. Recently, a sr exec at Stewart Title fueled the rumor mill by eluding to the distinct possibility of a merger between 2 oligopolistic giants who remain anonymous. Yesterday, there was a post on Clearing Title mentioning the entry of IBM into automated mortgage processing. It's ridiculous to expect for large corporations to effect serious change and upheaval in lucrative markets and not to interact in ways that benefit only themselves. In other words, the big players. It's going to be an interesting year and I predict that title insurers are interested, in the long run, in commissions from the sale of real estate and will eventually give title insurance policies away for free.
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