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Just released 2009 market share report shows an upside to a dismal private-passenger auto share.
As expected, 2009 was defined by a continuing weak economy as well as soft pricing in the property‐casualty market, according to recent analysis of industry data. While commercial lines experienced negative premium growth, personal lines grew slightly (aided by small gains in homeowners).
While the state of affairs in private‐passenger auto share is sobering, there is plenty of good news overall for the independent agency system, including replenished numbers, growth potential and proven efficiency.
The entire IA system continues to prove itself as an impressive distribution channel unmatched anywhere for p-c insurance, even in a difficult economic environment. The number of independent agencies has also held steady at 37,500 since 2006, according to the IIABA Future One 2010 Agency Universe Study. New agencies are sprouting up at a rate replacing those going out of business via merger or sale; these newcomers are dynamic in terms of ownership age and diversity.
IAs still command the majority—60%—of all p-c lines. Efficient carriers are leveraging each type of distribution system—a consistent finding in the 15 years of this market share analysis. As the data show, well-managed independent agency writers can produce, distribute and service insurance products just as cost‐effectively as captive agent writers and direct companies—and, in some cases, even more so.
The overall property-casualty insurance market continued to decline, about 4% in 2009, according to data provided to the Big “I” by A.M. Best Co. Total direct written premiums were $461.2 billion in 2009, compared with $479.4 billion in 2008. Premiums have dropped nearly 6% from the 2007 level of $490.1 billion.
Independent insurance agents and brokers produced $259.9 billion of the total $461.2 billion property-casualty market in 2009—meaning they generated about $5.60 of every $10 written in overall premiums. But the IA overall share of the total p-c premium dropped by one percentage point, to 56.4%, in 2009. Independents wrote $276.3 billion of a total $479.4 billion market in 2008.
Prolonged soft pricing combined with a weak economy has hurt the revenue for commercial insurance carriers. Key factors are high unemployment, which is slicing payrolls and the resultant exposure base for workers compensation; and a pullback in construction, manufacturing, warehousing, transportation, fleet and retailing activity.
The overall commercial property‐casualty insurance market took another big hit in premium volume in 2009. Direct written premium dropped 8.1% to $229.8 billion (vs. $245 billion in 2008).
The overall personal lines market achieved a small gain in premiums in 2009—unlike in commercial. Personal lines production ended 2009 at $231.4 billion, a 0.8% increase from 2008. This is slightly better than year‐end 2008 where production was up 0.4% from the year prior.
Regional independent agency companies as well as the captive carriers were essentially flat in market share growth in 2009. Regional IA carriers held steady: Premiums remained at $54 billion and market share changed slightly (23.3% in 2009 vs. 23.5% in 2008). National IA carriers experienced a decline of more than $800 million in direct written premiums from 2008 to 2009. Market share is down slightly (10.3% in 2009 vs. 10.8% in 2008). Captive carriers continue to dominate the market with the majority of business ($124.5 billion in 2009), up about $354 million from 2008. However, market share was down one percentage point, to 54.1%.
Direct response writers are steadily increasing share, up 5.4 points since 1995. In the past couple of years, they have grown to surpass the national IAs (both in volume and share), but lag significantly behind regional IAs and captive carriers.
Despite weak pricing and a soft economy, the personal lines market continues to grow ($229.5 billion in 2008 to $231.4 billion in 2009). Private‐passenger auto alone represents fully one‐third of the total p-c premium pool, including commercial lines.
Diane Rusignola (firstname.lastname@example.org) is IA managing editor.