As online auto insurance shopping becomes more popular, direct response service among auto carriers has nearly doubled in the last 15 years. And, 28 percent of auto market direct premiums written for private passengers uses direct channels, 31 percent uses agencies and 40 percent goes the exclusive/captive agent route, according to a new report from A.M. Best, titled “Distribution Trends Continue to Shift in the Private Passenger Automobile Market.”

While the agency channel has remained consistent over the last decade and a half, the exclusive/captive agent channel has decreased by 11 percent and direct channels have grown by 13 percent.

A major contributor to the transition is online sales, which, according to A.M. Best, have grown from 700,000 purchases in 2004, to 3.1 million online policy purchases in 2011.

From an underwriting profitability perspective, the direct channel maintained the lowest combined ratio (95) between 2008 and 2012, benefitting from having an expense ratio of 20.8, well below the average across all channels (24.2). For the same period, the agency channel posted a combined ratio of 97.3, and the exclusive/captive agent channel experienced the highest at 98.2.

During this transition to more direct channels, as companies look to leverage economies of scale for greater operational efficiency, market consolidation has persisted. Indeed, the top 10 private passenger auto carriers serve 69.8 percent of the market, compared to 58.8 percent in 1995, according to A.M. Best.

The following are the 10 largest auto private passenger insurers (measured by market share):

1. State Farm Group (17.9 percent market share)

2. Allstate (10.1)

3. Berkshire Hathaway Insurance Group (GEICO) (9.7)

4. Progressive (8.4)

5. Farmers (6.0)

6. USAA (4.9)

7. Liberty Mutual (4.8)

8. Nationwide (4.1)

9. Travelers (2.0)

10. American Family (1.9)

Just as the company did in 2002, State Farm has the most market share, however, their market share stood at 19.3 percent then. Allstate also experienced a decrease, albeit slighter than State Farm’s, from 10.7 to 10.1 percent.

Berkshire Hathaway, jumping from 4.8 to 9.7 percent, and Progressive, from 5.8 to 8.4, saw the biggest gains in market share since 2002.

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