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- Property and Casualty Insurance - US - October 2011
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Property & Casualty Insurance–US–October 2011 focuses on the industry’s reaction to an increasingly price-driven and competitive market. The shifts in market share between the more traditional insurers and those focused on price advantages are discussed, as is the move away from agency writers to direct writers as more customers use the direct channel to buy auto and homeowners insurance. The ever-expanding relevance of the internet is part of the discussion, as many younger adults are buying through the website, either with or without the aid of an agent or rep.
As the price war has intensified, and churn rates are high, many P&C insurers have ramped up their efforts to attract new customers through not only promoting price advantages, but also new focuses on social media and mobile apps to increase interactivity with customers.
Scope and Themes
What you need to know
Data sources
Consumer survey data
VMS
Abbreviations and terms
Abbreviations
Terms
Companies mentioned in this report:
Executive Summary
Industry overview
Shifts in market share
The clash of low price versus quality
Advertising in the time of uncertainty
Buying online appeals to young adults
Smartphones and social media expand selling opportunities
Stopping texting when driving
Say goodbye to the “wealth effect”
Violent storms in 2011
Insights and Opportunities
Key points
Being connected and responsive is key
Continue to show cost savings, but trust and customer service still key
Delivering fairness via telematics
Confronting a lack of loyalty
Make websites complete for answering questions
Inspire Insights
Trend: Prepare for the Worst
Industry Application
Market Size
Key points
The industry has not yet recovered
Figure 1: Financial results for U.S. property and casualty insurers, 2006-10
Homeowners coverage shows the strongest growth
Figure 2: Total U.S. property and casualty direct written premium at current prices, 2007-10
Personal lines insurance taking an underwriting loss
Figure 3: P&C Industry combined ratios, 2001-11
Competitive Context
Key points
The price wars
Relationship building via Twitter
Esurance: Twitter
American Family: Twitter
Allstate Insurance: Twitter
Liberty Mutual: Twitter
M&A activity of insurers
Segment Performance
Key points
Auto insurance DWP little changed…
Figure 4: Total U.S. private passenger auto insurance direct written premium at current prices, 1993-2010
…but in real terms, premiums have fallen substantially
Figure 5: Total U.S. private passenger auto insurance direct written premium at constant prices, 1993-2010
Average expenditure falls
Figure 6: Average expenditures for auto insurance, by state, 2006 and 2008
Homeowners DWP gains by 5% in 2010…
Figure 7: Total U.S. homeowners insurance direct written premium at current prices, 1993-2010
…and real premiums have doubled since 1993
Figure 8: Total U.S. homeowners insurance direct written premium at 2010 inflated prices, 1993-2010
Average premiums fall back from their 2007 peak
Figure 9: Average premiums for homeowners and renters insurance, 2000-08
Figure 10: Average premiums for homeowners and renters insurance at 2008 inflated prices, 2000-08
Homeowners combined ratio expected to rise again
Figure 11: Combined ratios for personal lines, 1993-2011
Marketing Channels
Key points
Most sales through direct writers
Figure 12: Types of agents as a percentage of net written premium, 2010
Most buy auto insurance through an agent
Figure 13: Channel used for purchase of auto insurance, by gender, July 2011
Internet becomes part of buying process among those 18-34
Figure 14: Channel used for purchase of auto insurance, by age, July 2011
Hispanics and Asians work around speaking with an agent
Figure 15: Channel used for purchase of auto insurance, by race/Hispanic origin, July 2011
Figure 16: Channel used for purchase of auto insurance, by household income, July 2011
The internet mostly cannibalizes sales from agents
Figure 17: Distribution channels used by new buyers, 2007 and 2011
Agents and the internet are primary information sources
Men more active than women in exploring different channels
Figure 18: Sources used for obtaining information before purchase, by gender, July 2011
Agents appeal to those 55+
Figure 19: Sources used for obtaining information before purchase, by age, July 2011
Figure 20: Sources used for obtaining information before purchase, by ethnicity, July 2011
Higher earners comfortable with online research
Figure 21: Sources used for obtaining information before purchase, by household income, July 2011
The impact of marketing channels overall – the internet
Figure 22: Influence of internet on media consumption, by generation, February 2009-March 2010
The impact of marketing channels overall—smartphones
Smartphone insurance apps appeal more to men than women
Figure 24: Whether have an app from auto insurance company on smartphone, by gender, July 2011
Figure 25: Whether have an app from auto insurance company on smartphone, by age, July 2011
Insurance app usage
Figure 26: Smartphone owners who have an insurance app, by gender, July 2011
The aggregator channel is growing in the U.S.
Figure 27: Insurance aggregators ranked by total unique visitors, Q4 2009 vs. Q4 2010
Insurance Sales Channels – the UK Experience
Key points
A radically different distribution model
Key lessons for U.S. insurers
Market dynamics
Defending against comparison sites
Impact on risk management
Online sales exacerbate existing trends
Online sales vary by product type
Figure 28: Preferred channels for arranging different general insurance products in the UK, August 2010
Three quarters of UK consumers have used comparison sites for financial research
Figure 29: Aggregator usage in the UK, April 2011
Aggregator usage snowballs after the first purchase
Figure 30: Repertoire of aggregator usage for research, April 2011
…and in buying behavior
Figure 31: Repertoire of aggregator usage for purchase, April 2011
The impact on loyalty
Figure 32: Insurance product ownership, by length of time insurance products held, August 2010
Market Drivers
Key points
The U.S. population matures
Figure 33: U.S. population, by age, 2010-15
Unemployment stubbornly high
Figure 34: Unemployment (U3) and underemployment (U6) rates, January 2007-August 2011
Figure 35: Employment – population ratio, January 2000-August 2011
Job creation anemic
Figure 36: Total non-farm payroll losses and gains, in thousands, January 2009-August 2011
Consumers overloaded on debt
Figure 37: Total debt balance and its composition, Q1 1999-Q1 2011
Foreclosures, bankruptcies populate the landscape
Figure 38: Number of consumers with new foreclosures and bankruptcies, 1999-2010
The bursting of the Housing Bubble
Figure 39: Case-Schiller 20-city composite, seasonally adjusted, January 2000-April 2011
Figure 40: Median price for homes, 1998-2010
Figure 41: Private housing starts (in millions), 2000-12
Figure 42: Existing home sales, 1998-2010
Some improvement in auto sales
Figure 43: Auto and light truck sales (in millions), 2000-12
Consumers uneasy about money, future
Figure 44: Median change in family wealth, 2007-09, by age of household head and region
Figure 45: Consumer sentiment, March 2007-August 2011
Leading Companies
Key points
State Farm: significantly in the lead
Figure 46: Top writers of property/casualty insurance by direct written premiums written, 2008-10
State Farm, GEICO, Liberty Mutual gain share in auto
Figure 47: U.S. private passenger auto insurance top writers, by direct written premium 2007-10
Liberty Mutual, Travelers, USAA gain big for homeowners
Figure 48: Homeowners insurance top writers, by direct written premium 2007 and 2010
Brand Qualities
Key points
Being dependable/trustworthy most important
Figure 49: Important qualities of auto insurance provider, July 2011
Men place more importance on social media
Figure 50: Important qualities of auto insurance provider, by gender, July 2011
Company websites are important to younger adults
Figure 51: Important qualities of auto insurance provider, July 2011
Figure 52: Important qualities of auto insurance provider, by household income, July 2011
Geico, Progressive liked for their websites, social media communications
Figure 53: Important qualities of auto insurance provider, by household income, July 2011
Amica Mutual and USAA highest rated on satisfaction
Figure 54: Satisfaction ratings given to highest rated auto insurers and homeowners insurers, 2010
Innovation and Innovators
Key points
State Farm’s Discount Double Check
Allstate’s Drive Wise
Progressive’s Snapshot Pay As You Drive
Allstate’s X the TXT
State Farm’s On the Move
Allstate’s keepthedrive.com
PhoneGuard
Progressive’s Flo-isms App
GEICO HomeFront
GEICO Glovebox
Esurance RepairView
Allstate’s GoodRide
State Farm NEXT DOOR
State Farm 60-second text-to-quote for car insurance
Marketing Strategies
Key points
Overview
Print advertising
Figure 55: GEICO Glovebox app print ad, 2011
Figure 56: Progressive homeowners insurance print ad, 2011
Figure 57: Progressive Snapshot Discount insurance print ad, 2011
Direct-mail advertising
Figure 58: AARP/The Hartford auto insurance direct mail ad, 2011
Figure 59: Farmers homeowners insurance direct mail ad, 2011
Figure 60: USAA auto insurance direct mail ad, 2011
Figure 61: Nationwide auto insurance direct mail ad, 2011
Figure 62: Allstate motorcycle insurance direct mail ad, 2011
Online and email advertising
Figure 63: State Farm Discount Double Check online advertisement, 2011
Figure 64: Allstate Truth auto insurance online advertisement, 2011
Figure 65: Liberty Mutual Subaru Advantage Plan email advertisement, 2011
Figure 66: Esurance email advertisement, 2011
Television advertising
Figure 67: Esurance “Alan is a technical genius”, 2011
Figure 68: Progressive Snapshot Strike a Pose, 2011
Figure 69: State Farm, New Boyfriend, New Girlfriend, 2011
Figure 70: Allstate’s Mayhem Motorcycle, 2011
Figure 71: Hawaiian Farmers Insurance, 2011
Figure 72: Travelers Cat Burglar, 2011
The Consumer – P&C Insurance Ownership
Key points
More than three in four have auto insurance
Figure 73: Ownership of financial products, by gender, July 2011
A strong link between age and insurance ownership
Figure 74: Ownership of financial products, by age, July 2011
Auto insurance is near-universal among higher earners
Figure 75: Ownership of financial products, by household income, July 2011
A risk of under-insurance among black households?
Figure 76: Ownership of financial products, by race/Hispanic origin, July 2011
The Consumer – Choice of Insurer
Key points
State Farm, Allstate lead in personal lines
Figure 77: Provider of auto insurance, homeowners insurance, renters insurance, other (marine, aviation, etc.) personal insurance, July 2011
GEICO and Allstate compete for second place in the auto market
Figure 78: Provider of auto insurance, by gender, July 2011
Figure 79: Provider of auto insurance, by age, July 2011
Considerable variation between different races/ethnicities…
Figure 80: Provider of auto insurance, by race/Hispanic origin, July 2011
…and this variation isn’t explained by differing income levels
Figure 81: Provider of auto insurance, by household income, July 2011
State Farm leads the way for homeowners
Figure 82: Provider of homeowners insurance, by gender, July 2011
Figure 83: Provider of homeowners insurance, by age, July 2011
Hispanic and Asian consumers take a different approach to insurer selection
Figure 84: Provider of homeowners insurance, by race/Hispanic origin, July 2011
Figure 85: Provider of homeowners insurance, by household income, July 2011
State Farm also strong among renters
Figure 86: Provider of renters insurance, by gender, July 2011
The Consumer – Trends in Ownership and Face Value
Key points
Fewer carry P&C insurance in 2011
Figure 87: Trends in ownership of automotive insurance, homeowners insurance, and renters insurance, 2006-11
Policy face values have also declined
Figure 88: Face value of automotive and homeowners insurance policies, 2008 and 2011
The Consumer – Overall Financial Situation
Key points
Many still gloomy about the economy
Figure 89: Attitude about finances: better or worse than 12 months ago, 2009-11
Figure 90: Consumer outlook for personal finances over next 12 months, 2009-11
Figure 91: Consumer outlook for American economy, next 12 months, 2009-11
Buying big-ticket items does not appeal
Figure 92: Likelihood of buying a big ticket item in next 30 days, 2009-11
Cluster Analysis
In-person Buyers
Demographics
Characteristics
Opportunity
Green Riders
Demographics
Characteristics
Opportunity
Direct Liners
Demographics
Characteristics
Opportunity
Cluster characteristic tables
Figure 93: Property and casualty insurance clusters, July 2011
Figure 94: Types of financial products owned, by property and casualty insurance clusters, July 2011
Figure 95: Channels used for researching auto insurance providers, by property and casualty insurance clusters, July 2011
Figure 96: How auto insurance was purchased, by property and casualty insurance clusters, July 2011
Figure 97: Importance of qualities in purchase of auto insurance, by property and casualty insurance clusters, July 2011
Cluster demographic tables
Figure 98: Property and casualty insurance clusters, by gender, July 2011
Figure 99: Property and casualty insurance clusters, by age, July 2011
Figure 100: Property and casualty insurance clusters, by household income, July 2011
Figure 101: Property and casualty insurance clusters, by race/Hispanic origin, July 2011
Figure 102: Property and casualty insurance clusters, by education, July 2011
Figure 103: Property and casualty insurance clusters, by employment, July 2011
Figure 104: Property and casualty insurance clusters, by marital status, July 2011
Cluster methodology
Appendix—Simmons Mosaic Analysis
Key points
Personal lines insurance most attractive to the affluent
Figure 105: Ownership of automotive insurance, homeowners insurance and renters insurance, by mosaic segment, February 2010-March 2011
Figure 106: How obtained insurance, by mosaic segment, February 2010-March 2011
Affluent segments heaviest users of internet websites
Figure 107: Visited websites in last 30 days, by mosaic segment, February 2010-March 2011
Figure 108: Used internet at home in last 7 days, by mosaic segment, April 2009-June 2010
Figure 109: Attitudes about the internet, percent agree, by mosaic segment, April 2009-June 2010
Most are optimistic about coming year for finances
Figure 110: Economic outlook better/worse next 12 months, by mosaic segment, February 2010-March 2011
Appendix—Trade Associations
- American Family Insurance Group
- Berkshire Hathaway Inc
- Chubb Group of Insurance Companies
- Erie Insurance Group
- Google, Inc.
- Government Employees Insurance Company
- J.D. Power and Associates
- Liberty Mutual Holding Company Inc.
- National Association of Insurance Commissioners (NAIC)
- State Farm Insurance Companies
- The Hartford Financial Services Group, Inc.
- USAA
- Zurich Financial Services
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