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Property and Casualty Insurance - US - October 2011

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.

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Table of contents

  1. 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

                                                                                                                                                                                              Companies Covered

                                                                                                                                                                                              • 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

                                                                                                                                                                                              Property and Casualty Insurance - US - October 2011

                                                                                                                                                                                              £2,684.63 (Excl.Tax)