Abstract
The U.S. commercial property/casualty insurance industry functions in a highly competitive marketplace. While the overall cost of coverage declines, the cost of property coverage in catastrophe-prone areas is rising. Government and the industry are grappling with regulatory reform and insurance programs to address the huge loss potential of such catastrophes. The industry faces challenges in maintaining profitability as catastrophes become more frequent and more costly.
This report reviews issues in the commercial insurance industry, providing answers to the following questions:
- How is the commercial agency force segmented among key characteristics, including agent demographics and agent-company relationships?
- Which factors most influence agents in their selection of commercial insurers for their clients?
- How has commercial insurance pricing and profitability changed during the past several years? What is the industry outlook?
- What are the potential costs of future catastrophes? How can the insurance industry and government address these risks?
- How have specific commercial lines, such as commercial auto, workers' compensation and medical malpractice, performed in recent years? What issues challenge the profitability of these lines?
- How are the industry and specific insurers applying technology to obtain a competitive advantage?
This report looks at the broader issues in the marketplace for commercial insurance, including performance measurables; trends in the occurrence of catastrophic events and resulting losses; regulatory and legislative developments; market size and segmentation; and agency issues. In addition, an exclusive Mintel survey looks at agent attitudes and behavior towards selling commercial insurance. The data shows that while agents most value coverage customization, there are many additional factors that influence what products agents offer to their clients.
Table of Contents
- Scope and Themes
- What you need to know
- Scope of the report
- Abbreviations and terms
- Abbreviations
- Terms
- Executive Summary
- Industry snapshot
- Two markets: areas with major catastrophic exposure and those without
- Preparing for potential catastrophes
- Federal legislation under consideration
- Tort environment is changing
- Market concentration and market-share leaders vary by commercial product line
- Proprietary survey findings reveal attitudes of commercial agents
- Commercial share of agent business
- Companies represented
- Agent longevity
- Factors influencing choice of commercial carriers
- Securing coverage for businesses in disaster prone areas
- Technological and marketplace developments benefit commercial agents
- Market Drivers and Future Trends
- Currently a highly competitive, soft market
- Figure 1: Average commercial rate change, all lines, Q1 2004-Q4 2006
- Figure 2: Commercial accounts rate changes, Q2 2006 and Q4 2006
- Figure 3: Rate changes for commercial insurance by size of accounts, Q1 2005-Q3 2006
- Figure 4: Percentage of commercial accounts renewing with positive rate changes, Q2 2006 and Q4 2006
- Figure 5: Anticipated price increases projected during 2007, by market sector
- Excess and surplus also impacted
- Soft market-but profitable
- Figure 6: Property/casualty net income after taxes, 1991-2006
- Combined ratios improving
- Figure 7: Property and casualty industry combined ratio, 2001-08
- Figure 8: Commercial lines property and casualty combined ratio vs total property and casualty, 2001-06
- Figure 9: Combined ratios of property and casualty by commercial product line, 2005 and 10 year average
- Investment income' s contribution to profitability
- Predictive analytics improving underwriting
- Two markets: areas with major catastrophic exposure and those without
- Figure 10: Total value of insured commercial coastal exposure, 2004
- Global warming and macro outlook for hurricanes
- Annual experience differs by types of catastrophes that predominate
- Figure 11: Catastrophic losses, 1996-2006
- Figure 12: U.S. Catastrophe losses, by states with largest losses, 2006
- Figure 13: Number of tornadoes, 1985-2006
- Population growth in high-risk areas continues
- Outlook for 2007-catastrophes becoming more expensive
- State-owned “citizens” insurance companies
- Analysis of terrorism attacks under way
- Alternatives to traditional commercial insurance
- Figure 14: Percentage of premium written by risk retention groups, by industry, 2006
- Post-Katrina litigation
- Catastrophe modeling growing in sophistication
- Insuring terrorism exposure
- Regulatory environment
- Proposed repeal of antitrust exemption; McCarran-Ferguson
- Federal chartering of insurers: the debate continues
- Tort reform
- New legislation impedes class action cases
- Commercial lines-other specific issues
- Workers compensation
- D&O in aftermath of Enron
- Extended hours, extended risks
- Environmental coverage
- Medical malpractice: situation is improving but pendulum may swing in the
other direction
- Figure 15: Medical malpractice start-ups by year of commencement, 2002-05
- Figure 16: Start-ups by organizational structure, 2002-05
- Medical malpractice claims analysis
- Commercial auto underwriting
- Cyber threats, privacy protection and other emerging risks
- Some things never change…
- Market Size and Segmentation
- Premiums by product line for U.S. commercial insurance
- Figure 17: Net premiums written by line, property/casualty insurance, 2003-05
- Market concentration-market share of top ten companies
- Figure 18: Cumulative U.S. market share by top ten groups and companies by line of business, 2005
- Writers share of market, by product line
- Commercial multiple peril
- Figure 19: Commercial multiple peril, market share by premiums written, 2005
- Commercial auto
- Figure 20: Commercial auto market share, by direct written premium, 2005
- Figure 21: Commercial auto, leading states ranked by direct premiums written, 2005
- Workers compensation
- Figure 22: Workers compensation market share, by written premium, 2005
- Medical malpractice
- Figure 23: Medical malpractice insurers by market share, direct premiums written, 2005
- Competitive Landscape
- Small business focus
- Automated underwriting as a competitive advantage for insurers
- Cooperative automation among carriers
- Branding/publicity campaigns
- Product introductions and enhancements
- Non-conventional risks generate moderate interest
- Figure 24: Importance of non-conventional risks, 2007
- Broker preferences
- Figure 25: Preference for key broker services and selection, 2007
- The Commercial Agent Survey
- Summary of consumer survey
- Characteristics of agents
- Share of business that is any type of commercial property/casualty
insurance
- Figure 26: Commercial property/casualty insurance as percentage of agents' business, by gender and age, 2007
- Figure 27: Commercial property/casualty insurance as percentage of agents' business, by education and employment, 2007
- Figure 28: Commercial property/casualty insurance as percentage of agents' business, by census region, 2007
- Types of agents
- Figure 29: Type of agent, by gender, 2007
- Figure 30: Type of agent, by age, 2007
- Figure 31: Type of agent, by marital status, 2007
- Figure 32: Type of agent, by education, 2007
- Figure 33: Type of agent, by census region, 2007
- Length of time as an insurance broker
- Figure 34: Length of time as insurance agent, by gender, 2007
- Figure 35: Length of time as insurance agent, by age, 2007
- Figure 36: Length of time as insurance agent, by marital status, 2007
- Figure 37: Length of time as insurance agent, by education, 2007
- Figure 38: Length of time as insurance agent, by census region, 2007
- Commercial lines represented by agent
- Figure 39: Commercial lines represented by agent, by gender, 2007
- Figure 40: Commercial Lines represented by agent, by age, 2007
- Figure 41: Commercial Lines represented by agent, by marital status, 2007
- Figure 42: Commercial Lines represented by agent, by education, 2007
- Figure 43: Commercial Lines represented by agent, by census region, 2007
- What influences the choice of carrier?
- Figure 44: Factors that influence choice of commercial lines insurer for clients, by gender, 2007
- Figure 45: Factors that influence choice of commercial lines insurer for clients, by age, 2007
- Figure 46: Factors that influence choice of commercial lines insurer for clients, by children under 18 in household, 2007
- Figure 47: Factors that influence choice of commercial lines insurer for clients, by education, 2007
- Figure 48: Factors that influence choice of commercial lines insurer for clients, by census region, 2007
- Experience in insuring businesses in disaster prone areas
- Figure 49: Experience in insuring businesses in disaster prone areas, by gender, 2007
- Figure 50: Experience in insuring businesses in disaster prone areas, by age, 2007
- Figure 51: Experience in insuring businesses in disaster prone areas, by education, 2007
- Figure 52: Experience in insuring businesses in disaster prone areas, by census region, 2007
- Distribution Channels
- Value of agencies
- Contingent commissions and the impact of the Spitzer investigation
- Market Forecast
- Commercial insurance
- Figure 53: Forecast of total U.S. net premiums written for commercial insurance, at current and constant prices, 2006-11
- Personal and commercial insurance
- Figure 54: Forecast of total U.S. net premiums written for personal and commercial insurance, at current and constant prices, 2005-8
- Forecast factors
- Appendix: Industry Associations
- Appendix: Advertising and Promotion
- Figure 55: Erie Ultrapack business insurance mailing, May 2007
- Figure 56: Farmers Insurance commercial mailing (garagekeepers), April 2007
- Figure 57: Zurich Insurance commercial mailing (travel agencies), April 2007
- Figure 58: Nationwide Insurance commercial mailing (golf courses), April 2007
- Figure 59: Progressive commercial auto mailing (Oregon), April 2007
- Figure 60: Conseco broker mailing, April 2007
- Figure 61: Progressive agent contest mailing, April 2007
- Figure 62: Progressive agent mailing, april 2007
