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Commercial and Small Business Insurance - US - October 2010

Commercial and small business insurance companies are very motivated, or so it appears, to put on the pressure to not only perform, but to compete effectively at this time. Their pieces of the pie have been shrinking due to the slumping economy beginning in late 2007.

The Commercial Property & Casualty business overall lost $17 billion in net written premium in 2009, after sustaining losses in 2008 as well. Workers’ Comp, a line that represents about $5 billion in premium, has been badly bruised by the economic downturn. Basically, all lines and nearly all insurers have reported losses of at least some magnitude during 2009.

This report will address the current overall economy as it relates to the insurance business and their commercial customers. It also reviews in depth the different marketing strategies employed by the larger insurers in the Commercial market.

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Table of contents

  1. Scope and Themes

      • What you need to know
        • Data sources
          • Consumer survey data
            • Advertising
              • Abbreviations and terms
                • Abbreviations
                  • Terms
                    • Companies mentioned in this report:
                    • Executive Summary

                      • Industry overview
                        • The heat is on
                          • The economy is not poised to turn around any time soon
                            • Figure 1: Key indicators, August 25, 2010
                          • Business owners take a mostly optimistic approach
                          • Insights and Opportunities

                              • Key points
                                • Businesses have been a little shaken up
                                  • Advertising and marketing efforts are key
                                  • Inspire Insights

                                      • Trend: Universal Uncertainty
                                        • Specifics
                                          • Implications
                                            • Trend: Resilience
                                              • Implications
                                                • Trend: Trust in Me
                                                  • Implications
                                                  • Market Size and Forecast

                                                    • Key points
                                                      • Commercial net written premium continues to decline
                                                        • Figure 2: Total U.S. commercial insurance net written premium at current prices, 2006-09
                                                        • Figure 3: Total U.S. commercial insurance net written premium at inflation adjusted prices, 2006-09
                                                      • For personal lines, as point of contrast, more stability
                                                        • Figure 4: U.S. private passenger auto insurance net written premium at current prices, 2006-09
                                                        • Figure 5: U.S. homeowners multiple peril net written premium at current prices, 2006-09
                                                      • It is likely no improvement will be seen for commercial in near future
                                                      • Competitive Context

                                                        • Key point
                                                          • The influence of AIG
                                                            • Consumers are not spending
                                                              • The Small Business Jobs Bill may help
                                                              • Segment Performance

                                                                • Key points
                                                                  • Past year losses across most segments
                                                                    • Figure 6: Net written premium of commercial insurance at current prices, by segment, 2007-09
                                                                  • Combined ratios point to workers compensation problems
                                                                    • Figure 7: Combined ratio of commercial insurance at current prices, by leading segments, 1999-2008
                                                                    • Figure 8: Combined ratio of commercial insurance at current prices, by leading segments, 1999-2010
                                                                • Marketing Channels

                                                                  • Key points
                                                                    • Agency writers are primary distribution channel
                                                                      • Figure 9: Commercial property and casualty net premiums written, 2008
                                                                    • Liberty Mutual moves commercial to agency writers
                                                                      • 2009 revenues down for top commercial brokers
                                                                        • Figure 10: Top 10 commercial insurance brokers (1) of U.S. business by revenues, 2008 and 2009
                                                                      • Selling commercial auto direct
                                                                      • Market Drivers

                                                                        • Key points
                                                                          • The U.S. population is becoming grayer
                                                                            • Figure 11: U.S. population, by age, 2010-15
                                                                          • Economy still taking a toll
                                                                            • Figure 12: U.S. unemployment rate, by month, July 2008-July 2010
                                                                            • Figure 13: Total non-farm payroll losses or gains, in thousands, July 2008-July 2010
                                                                            • Figure 14: Employment—Population ratio, January 2000-July 2010
                                                                          • Unfortunately for all, bankruptcies abound
                                                                            • Figure 15: Total business bankruptcies, 2001-10
                                                                            • Figure 16: Total non-business bankruptcies, 2001-10
                                                                          • Many businesses close, fewer start up
                                                                            • Figure 17: Total private sector business starts, Q1 2000-Q4 2009
                                                                          • The housing bubble is still bursting
                                                                            • Housing starts for year peaked in April
                                                                              • Figure 19: New privately owned housing starts, in thousands, August 2009-August 2010
                                                                          • Leading Companies

                                                                            • Key points
                                                                              • Commercial insurers experienced losses for 2009
                                                                                • Figure 20: Top 10 writers of commercial lines insurance, by direct premiums written, 2008 and 2009
                                                                              • Liberty Mutual and AIG report large workers compensation losses
                                                                                • Figure 21: Top 10 direct premium writers—workers compensation, 2008 and 2009
                                                                              • Travelers not too bad in commercial auto, others take losses
                                                                                • Figure 22: Top 10 direct premium writers—commercial auto, 2008 and 2009
                                                                              • Challenges still abound for AIG
                                                                                • Surplus lines also saw declines
                                                                                  • Figure 23: Top 10 U.S.-based surplus lines insurance companies by non-admitted direct written premium, 2008
                                                                              • Brand Qualities

                                                                                • Key points
                                                                                  • High ratings given to Chubb, Liberty Mutual, Zurich
                                                                                    • Chubb is customer-centric
                                                                                      • Travelers rated highly by Fortune
                                                                                        • Trustworthiness, financial soundness, honesty important
                                                                                          • Figure 24: Most important qualities of financial institutions, June 2010
                                                                                          • Figure 25: Factors that establish trust with financial services companies, July 2010
                                                                                      • Innovation and Innovators

                                                                                        • Key points
                                                                                          • Overview
                                                                                            • Travelers’ Telematics for Commercial Fleets
                                                                                              • Travelers’ Executive Choice+SM and SelectOne+SM
                                                                                                • Liberty International’s RED24 Expansion
                                                                                                  • Liberty Mutual’s WC Webinar
                                                                                                    • Liberty Mutual’s RISKTRAC®
                                                                                                      • Zurich raising awareness about solar storms
                                                                                                        • Chubb & Sons “Who May Sue You” report
                                                                                                          • Discussing risks of social media
                                                                                                            • Risks associated with vacant commercial real estate
                                                                                                              • Hartford’s affordable insurance for consultants
                                                                                                                • One-stop shopping for insurance
                                                                                                                  • Metals theft—Nationwide Insurance
                                                                                                                  • Marketing Strategies

                                                                                                                    • Key points
                                                                                                                      • Overview
                                                                                                                        • Travelers In-Synch
                                                                                                                          • Liberty Mutual’s Responsibility Project
                                                                                                                            • Figure 26: Liberty Mutual Swell’s Seafood Restaurant print ad, 2010
                                                                                                                          • Zurich HelpPoint
                                                                                                                            • Figure 27: Zurich HelpPoint Miami tunnel project print ad, 2010
                                                                                                                            • Figure 28: Zurich small business direct mail ad, 2009
                                                                                                                          • Direct mail and print advertising
                                                                                                                            • Nationwide Insurance
                                                                                                                              • Figure 29: Nationwide Premier Businessowners Policy direct mail ad, 2010
                                                                                                                              • Figure 30: Nationwide Agribusiness print ad, 2009
                                                                                                                            • Allstate
                                                                                                                              • Figure 31: Allstate business Auto Insurance direct mail ad, 2010
                                                                                                                            • Progressive
                                                                                                                              • Figure 32: Progressive Commercial Truck Driver direct mail ad, 2010
                                                                                                                            • AON and CNA
                                                                                                                              • Figure 33: Aon CPA Value Plan direct mail ad, 2009
                                                                                                                            • Farmers Insurance
                                                                                                                              • Figure 34: Farmers Insurance Direct mail ad, 2010
                                                                                                                              • Figure 35: Farmers retail Store Program direct mail ad, 2010
                                                                                                                            • InsuranceEdge.com
                                                                                                                              • Figure 36: InsuranceEdge.com direct mail ad, 2010
                                                                                                                            • Illinois Manufacturers’ Association
                                                                                                                              • Figure 37: Illinois Manufacturers’ Association Pay-As-You-Go workers compensation direct mail ad, 2009
                                                                                                                            • Unum
                                                                                                                              • Figure 38: Unum Insurance Print ad, 2010
                                                                                                                            • Television advertising
                                                                                                                              • Figure 39: Liberty Mutual Doing the Right Thing, 2010
                                                                                                                              • Figure 40: Travelers In-Synch Prized Possession (dog with bone), 2009
                                                                                                                              • Figure 41: Travelers Little Red Umbrellas, 2010
                                                                                                                              • Figure 42: Zurich Help Point Woman Gets Help After Fire, 2010
                                                                                                                          • The Consumer—Business Owners and the Self-Employed

                                                                                                                              • Key points
                                                                                                                                • Most self-employed are males and those 55+
                                                                                                                                  • Figure 43: Demographic characteristics of the self-employed, February 2009-March 2010
                                                                                                                                  • Figure 44: Where self-employed work, by gender, February 2009-March 2010
                                                                                                                                  • Figure 45: Where self-employed work, by age, February 2009-March 2010
                                                                                                                                  • Figure 46: Where self-employed work, by race/ethnicity, February 2009-March 2010
                                                                                                                                • Working at home skews to college grads
                                                                                                                                  • Figure 47: Where self-employed work, by education, February 2009-March 2010
                                                                                                                                  • Figure 48: Where self-employed work, by region, February 2009-March 2010
                                                                                                                                • Male business owners bring in more revenue
                                                                                                                                  • Figure 49: Size of business, by gender and age, July 2010
                                                                                                                                  • Figure 50: Size of business, by education and region, July 2010
                                                                                                                                  • Figure 51: Number of employees, by gender and age, July 2010
                                                                                                                                  • Figure 52: Number of employees, by education and region, July 2010
                                                                                                                                  • Figure 53: Number of employees, by gender and age, July 2010
                                                                                                                                • About 60% of businesses carry insurance
                                                                                                                                    • Figure 54: Own any type of business insurance, by education and region, July 2010
                                                                                                                                    • Figure 55: Own any type of business insurance, by gender and age, July 2010
                                                                                                                                    • Figure 56: Own any type of business insurance, by education and region, July 2010
                                                                                                                                  • Property and liability insurance largest products
                                                                                                                                      • Figure 57: Types of business insurance owned, by revenue and employee size, July 2010
                                                                                                                                    • About 30-40% have had needs reviews with agents
                                                                                                                                        • Figure 58: Actions taken in last two years, by types of business insurance owned, July 2010
                                                                                                                                        • Figure 59: Actions taken with property insurance in last two years, July 2010
                                                                                                                                        • Figure 60: Actions taken with liability insurance in last two years, July 2010
                                                                                                                                        • Figure 61: Actions taken with worker’s compensation insurance in last two years, July 2010
                                                                                                                                      • Property and liability insurance most valuable
                                                                                                                                          • Figure 62: Types of business insurance owned and intention to buy/renew, July 2010
                                                                                                                                          • Figure 63: Business insurance—intention to buy/renew, by gender and age, July 2010
                                                                                                                                          • Figure 64: Business insurance—intention to buy/renew, by revenues and number of employees, July 2010
                                                                                                                                        • Business owners mostly optimistic about coming year
                                                                                                                                          • Figure 65: Opinions about future business conditions, by gender and age, July 2010
                                                                                                                                          • Figure 66: Thoughts about business conditions for company, by education and region, July 2010
                                                                                                                                      • Appendix: Simmons Mosaic Analysis

                                                                                                                                          • Key points
                                                                                                                                            • Affluent Suburbia heaviest users of financial products
                                                                                                                                              • Figure 67: Demographic characteristics of the self-employed, by mosaic segment, February 2009-March 2010
                                                                                                                                              • Figure 68: Where self-employed work, by region, February 2009-March 2010
                                                                                                                                          • Appendix: Trade Associations

                                                                                                                                            Companies Covered

                                                                                                                                            • AIG Group (American International Group Inc)
                                                                                                                                            • Aon Corporation
                                                                                                                                            • Auto-Owners Insurance Group
                                                                                                                                            • Chubb Group of Insurance Companies
                                                                                                                                            • CNA Financial Corporation
                                                                                                                                            • Facebook, Inc.
                                                                                                                                            • HSBC USA Inc.
                                                                                                                                            • Insurance Information Institute Inc.
                                                                                                                                            • Liberty Mutual Holding Company Inc.
                                                                                                                                            • Marsh & McLennan Companies, Inc.
                                                                                                                                            • McDonald's U.S.A.
                                                                                                                                            • National Association of Insurance Commissioners (NAIC)
                                                                                                                                            • The Hartford Financial Services Group, Inc.
                                                                                                                                            • Twitter, Inc.
                                                                                                                                            • U.S. Bureau of Labor Statistics
                                                                                                                                            • Unilever USA
                                                                                                                                            • US Department of Commerce
                                                                                                                                            • YouTube, Inc.
                                                                                                                                            • Zurich Financial Services

                                                                                                                                            Commercial and Small Business Insurance - US - October 2010

                                                                                                                                            £3,174.67 (Excl.Tax)