“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,” said 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 percent. 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,” said Stephan Christiansen, director of research at Conning Research. “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.”
Conning Research and Consulting provides insurance industry analysis to insurers and industry stakeholders. The Conning name has represented excellence in independent insurance industry research for 50 years. As a result of its wealth of experience and intimate knowledge of the insurance industry, Conning understands industry challenges and opportunities and provides in-depth insights and analyses on a wide range of industry products and issues. Conning is headquartered in Hartford, CT.