From a growth and profitability standpoint, small- and mid-sized personal lines insurers appear to have fared better than large ones over the past decade, according to a report from Conning, the research and consulting firm.
Conning’s growth and profit leaders, a group of 18 personal lines insurers, are diverse, ranging in size from below $100 million in premium those with premium greater than $10 billion. But of the 56 companies with personal lines direct premiums written in excess of $500 million in 2012, only four: GEICO and Infinity Property & Casualty in auto, and ASI in homeowners and USAA on both lists, qualified for the list of longer-term profitable, growing insurers.
“Thus, while there would appear to be significant advantages to size in a market where low price is emphasized — and economies of scale to be leveraged by the large insurers — the firms making our list are primarily small- to mid-sized companies,” Conning said.
Market leaders also employ a variety of distribution channels, including independent agency, general agency, direct response and affinity group marketing. Growth has been strongest in the direct response channel, Conning said, the two largest insurers in the group use that channel. The independent agency channel, however, was the most common for the growth and profit leaders.
Conning’s growth and profit leaders also share a bias to writing business in high premium growth states, according to the report, and tend toward specialization.
“At least half of the members of the group have clearly identifiable product or customer segment specialties, and a number of others have a regional specialization, sometimes in addition to a product niche,” said Steve Webersen, director of research at Conning.
Growth in personal auto insurance has been difficult, but was the driver of dollar growth for the group, Conning said, and accounted for 85 percent of premium growth from 2003 to 2012. In that same period, growth in homeowners’ as not sufficient to keep pace with loss costs, according to the report.
“The group of successful insurers was able to find growth opportunities, however, growing 68 percent in the homeowners’ line while the total homeowners market managed only 22 percent growth,” Conning said.
The list of leaders is available with the purchase of the report. Conning’s “Growth and Profit Leaders in Personal Lines Insurance” analyzes the performance of personal lines companies to identify the growth and profit leaders over the past decade and notes characteristics of this group, identifying similarities and differences among the market leaders, Conning said.
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