1. News Articles
  2. Related News Articles
News Article Details

Market Share for Top Auto Writers Showed Little Movement in 2010: A.M. Best

Source: A.M. Best

Posted on 23 Aug 2011

Facebook LinkedIn Twitter Google

According to Best's Statistical Studies, market share for the top 25 writers of four lines of automobile insurance barely budged last year from 2009. In fact, the share for one of them -- the top 25 United States private passenger writers -- has stayed at 82.6% for the past three years, something that A.M. Best analyst Richard Attanasio did not find surprising.

"Scale is important in that segment," said Attanasio, vice president in the Property/Casualty Ratings Division. "It's a mature industry."

State Farm continued to lead the way in the private passenger line with $29.7 billion in direct premiums written and an 18.2% market share. Allstate Insurance Group maintained second place with $17.0 billion and a 10.4% share. But even Amica Mutual Group, which moved up to 25th from 26th in 2009, had more than $946 million in premiums.

Scale is important because of the transactional nature of the business and scale can provide cost efficiency, said Attanasio. In U.S. Auto Liability, market share for the top 25 fell just 0.1% in the past three years to 76.6%. It rose 0.1% for U.S. Commercial Auto to 66.3%, and it rose 0.4% for U.S. Auto Physical Damage, to 79.8%.

There were three changes in the past year among the top 10 in the private passenger line. Liberty Mutual Insurance Cos. moved up one spot to sixth, USAA Group moved up one to seventh, and Nationwide Group fell to eighth from sixth.

Liberty Mutual's direct premiums rose 4.8% last year, but Tim Sweeney, president of its personal markets business, said the company grew new business by almost 10% in terms of new policies, with about 5% due to traditional distribution and 12% to 15% due to direct. For the past 10 years, it has had a strategy of growing new distribution channels based on a philosophy that consumers will choose how to do business with their insurance company, Sweeney said. Liberty Mutual has doubled its captive sales force in the past six years, has built direct distribution through the Internet, its call center and mobile devices, and has added to its independent agent distribution and third-party relationships, he said.

"In the future, you have to be good at everything and great at a few things that are strategic to your company and situation," said Sweeney. "Our belief is that the consumer is in the driver's seat, not us."

USAA, which serves members of the military and their families, led the private passenger top 10 with a gain of 7.8% in direct premiums. It attributed its gains to expanded eligibility guidelines in effect since the fall of 2009 that made coverage available to veterans, said spokeswoman Rebecca Hirsch.

"We undertook some awareness campaigns, including national advertising," she said. Customer service, competitive products and access through mobile communications devices played a major role, she said.

Nationwide's premiums declined 4.8% in 2010, a good part of which was related to actions the company took involving underwriting, pricing and capital in managing its property book of business. Declines were recognized most in concentrated geographic areas where profit/capital actions were most significant, said Elizabeth Stelzer, communications consultant, in an email. "While the survey focuses only on auto, it's important to note that

Nationwide has a diverse portfolio of business that helps bolster our financial strength and our competitive position. It's this unique product mix, including highly attractive retirement planning products, which allows Nationwide to maintain an attractive competitive position."

So far this year, Nationwide's auto business has an improved retention ratio of more than 20 basis points, and new writings are up more than 11%, she said.

Attanasio said the top 25 carriers in the mature private-passenger auto segment generally have good persistency, so it is not easy to take business away from a competitor. "There's some movement, but we're talking about small percentages," he said. "Some companies could be making moves based on risk management initiatives."

One way he could envision a single company garnering significantly more market share on a year-over-year basis would be through an acquisition that brought two large companies together, Attanasio said.

Direct premiums written were up just 1.3% in the line. Attanasio cited several potential factors: People may be choosing higher deductibles or may be keeping cars longer and dropping physical damage coverage. And some families may have scaled back the number of cars they own given economic conditions, he said.

The commercial auto segment experienced a collective decline of 3.5% in premiums among the top 25 writers. That may be because the commercial segment has been hit harder by economic conditions, Attanasio said.