Hartford, Conn. - The economics of distribution channels in personal auto insurance can be difficult to understand, and this can present both opportunities and challenges in a softening rate market, according to a new study by Hartford, Conn.-based Conning Research & Consulting.
"Many insurers now choose to distribute personal auto insurance through multiple channels, ranging from traditional independent agencies, to exclusive or captive agents, to direct response and the Internet," says Alan Dobbins, analyst at Conning Research & Consulting Inc. "The difficulty for the insurer is that standard expense measures such as the expense ratio (relative to written premium) can obscure measures of efficiency and hide emerging strategic competitive opportunities."
The Conning Research study, "The Economics of Personal Auto Distribution: Competing in a Softening Market," analyzes the issues that typically cloud an insurer's understanding of their distribution effectiveness, and the potential advantages of each channel in a softening market.
"Average premiums per policy can vary among companies by more than 100%," says Stephan Christiansen, director of research at Conning Research. "Acquisition costs to acquire or retain policies can vary by several hundred percent. All of these factors can be influenced by strategic choices in where, when and how companies grow their business. The market cycle presents opportunities for both agency distribution and direct distribution insurers. Direct writers can more easily enter and exit markets, while agency writers may have particular advantages in lower-cost insurance markets and market cycles. Yet management can become too focused on standard distribution benchmarks and miss opportunities presented by their particular channel mix."
Source: PR Newswire
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