This is the 19th year that the Big “I” has published its annual Market Share Report
The Big “I” has released its annual Market Share Report for 2015. The annual study takes a look at the 2013 Property-Casualty Insurance Market (the latest year for which data is available) with data made available by A.M. Best. Continuing the trend from last year, the overall picture for independent insurance agents in the U.S. is one of health and optimism. For the third consecutive year in a row, all property-casual insurance premium lines grew, with the overall market in 2013 increasing by approximately $25 billion over its 2012 levels. In addition, independent agents continue to control a majority of the P&C market, writing nearly 35% of all personal lines premiums and nearly 80% of commercial line premiums, representing nearly 57% of premiums overall.
In particular, the Big “I” noted the following statistics:
- IAs grew personal lines at faster rate than captive carriers, reporting a 3.6% growth in premiums (versus 3.4%);
- IAs grew personal lines premiums by $3.2 billion, which rivaled the growth reported by direct response writers, which reported $3.4 billion;
- For the second year in a row, IAs competed exceedingly well in the homeowners market. In both 2012 and 2013, IAs generated more than 57% of all of the growth in the homeowners market, and IAs reported annual growth rates of nearly 8% both years;
- Regional IAs grew personal auto premiums in 2013 almost as much as the entire direct response model. Regional IAs increased personal auto premiums by $2.8 billion in 2013, a mere $100 million less than the $2.9 billion in growth reported by the direct response channel;
- The direct channel continued to grow at a double digit rate of return as they continue to leverage their marketing and advertising expenditures to build their brand awareness.
If the outlook is optimistic for independent agents across the nation, what is going on in Massachusetts?
According to this year’s report, IA share grew in more states across the country than not, with at least seven states noting that IA share growth increased by at least 0.9%. Massachusetts, however, was not one of those states. While the Commonwealth still holds the number one spot for IA market share with Mass. agents have a 74.1% share of the personal lines market share, this year Massachusetts, along with Pennsylvania, were the only two states to see a 0.9% or more loss of market share. In commenting on this distinction, the report noted that,
Conversely, only two states lost 0.9% share or more. Despite the fact that IAs dominate Massachusetts, writing $3 of every $4 in premium, their share in that state is down by 1.8% since 2012 and by 3.3% since 2011. Similarly, in Pennsylvania, IA share dropped 1.2% relative to 2012, where IA share there is at 43.8%. In the rest of IA‐dominated New England, IA performance varied, but most of the states saw modest decreases in market share. In Maine, IA share dropped 0.3%. In New Hampshire, it was down 0.5%. Vermont had a slightly larger drop at 0.8% decrease in market share, and Connecticut was down 0.4%. On the other hand, IA share rose in Rhode Island by 0.3%. In all, IA share increased, at least slightly, in 26 states, while share decreased in 24 states and in the District of Columbia.
While many may say that Managed Competition is still affecting the marketplace, another likely culprit is the consolidation of agencies and the growth of mega-agencies in Massachusetts. So while Mass. agents may have lost the most market share in the nation this year, it is important to remember that the numbers are still relatively strong in comparison with the rest of the independent agencies market shares in other states.
Other interesting facts about the personal lines market from the Big “I” study:
Here are some other highlights from the report that we thought you might find informative:
- The personal lines market is as large as the commercial lines market, with each generating $266 billion a year. Booking even 0.1% share of the personal lines market actually translates to more than $266 million per year in premiums written.
- Personal lines premiums have grown at more than $10 billion a year for two years in a row. Capturing just 1 percentage point of the annual growth represents an opportunity of $100 million in premiums written.
- The independent agency carriers’ overall share is higher now than it was during the 1990s, and regional IAs have increased their market share from about 18% to more than 26% of the personal lines market.
- Of the top national and regional independent agency carriers, one‐half of these firms grew premiums above the overall market average and thus increased their market share in 2013.
- IAs were able to grow personal lines market share at least slightly in 26 states.
- Many IAs are proving that the model can work in the private‐passenger auto market, which has now grown to $181 billion a year. Of the top national and regional IAs, far more increased premiums in this market than not, and many grew those premiums faster than the overall market average. Collectively, IAs still write approximately one‐third of all private auto premiums, despite the increased competition from direct response writers.
- Relative to commercial lines — which are 80% dominated by independent agents and brokers — car, home and related personal lines of coverage represent a massive pool of untapped potential into which independent agents and brokers can wade. Well‐managed, strategically thinking and proactive firms are seeking customers in all lines of coverage, including personal lines.
- Many IAs are competing locally with direct response and captive agencies by combining customized service and advanced technology to personal lines marketing. In addition to exceptional personal service, agents are using real‐time pricing and communications technologies to provide a set of competitively priced products and choices from multiple Trusted Choice® insurance brands, which direct response websites, call centers nor captive agencies can do.
- Some IAs have taken on direct response competitors directly by providing affordable instant online quotes at agency websites and then adding exceptional customer service during customer onboarding, routine servicing, and renewal.
Independent agents continue to dominate the Commercial Lines market in the U.S.
This is the third straight year of strong growth for the commercial lines market, with independent insurance agents driving the majority of this growth. In 2013, independent agents increased their premiums by some $10.5 billion versus 2012 totals, writing a total of $210.9 billion. Independent agents across the nation continued to dominate the commercial auto market, representing 86.5% of the market. While captive agents did grow their premiums and saw a 5.4% boot, direct response giants have failed to replicate their personal auto success in the commercial market as of yet.
As for commercial lines, this is the second year in a row that the national average for worker’s compensation insurance has grown faster than the rest of the commercial lines, with nearly all of the year over year growth coming from independent agency writers. In the overall picture, however, Massachusetts was neither one of the states with the largest gains or losses with respect to the commercial market share for independent insurance agents from 2012 to 2013.
What about the Direct Writers?
Over the last 18 years, Direct Writers have increased their personal automobile insurance share by 11 percentage points. With that said, however, the Big “I” notes that regional IA carriers grew almost by the same amount as direct response companies from 2012 to 2013. More interesting, this year’s Market Share Report notes that while direct writers have definitely made their presence felt in the personal auto insurance marketplace, they have yet to translate that success into the the homeowners market. Direct writers currently write only 6 percent or $5 billion of the $80 billion dollar homeowners market. And as for commercial lines, they write less than 1 percent of all commercial auto insurance premiums.
Other interesting information from this year’s Market Share Report
The following are some information and interesting graphs from this year’s report. All of the graphs are courtesy of The Big “I” and AM Best.