Property and Casualty Insurance - US - April 2006

INTRODUCTION AND ABBREVIATIONS
Introduction
Other relevant reports
Scope of the report
Abbreviations and terms
Abbreviations
Terms
EXECUTIVE SUMMARY
The industry is looking for greater efficiencies
Catastrophes have had an impact
What consumers think about insurers
Consumers and renters/tenants insurance
Agents are still preferred
What’s ahead
MARKET DRIVERS
Figure 1: Graph: Property and casualty insurance products, by percentage of industry direct written premiums, 2004
Increasing efficiencies
Technology and expense management
Figure 2: Insurance industry employment, 2000-05
More efficient claims management
Black-box technology
Greater pricing segmentation
Figure 3: Graph: Property and casualty industry underrwriting gain or loss – 1975 – 2006 (est.)
Figure 4: Average expenditures on homeowners’ and auto insurance, 1994-2006
Credit ratings
Catastrophic losses
Product developments
Distribution channels
Combined ratios are better, but are they good enough?
Figure 5: P&C industry combined ratio, 2001-06
MARKET SIZE AND SEGMENTATION TRENDS
Growth in premiums
Figure 6: Private passenger auto and homeowners’ insurance direct written premium, 1993-2004
Figure 7: Growth in median home prices vs. homeowners insurance DWP, 2000-05
Average consumer expenditures by state
Figure 8: Annual per insured consumer auto expenditures, by state, 2003
Industry performance—growth in combined ratio
Figure 9: Combined ratios for property and casualty insurers, 1993-2005
Figure 10: Property casualty insurance industry investment total gains, 1994-2005
COMPETITIVE LANDSCAPE
 PRIVATE PASSENGER AUTOMOBILE INSURANCE
Figure 11: Private passenger auto insurance top writers, by direct written premium, 2004
 HOMEOWNERS INSURANCE
Figure 12: Homeowners insurance, top writers by direct written premium, 2004
Allstate Insurance Group
Farmers Group, Inc.
GEICO
Nationwide Mutual Insurance Company
The Progressive Corporation
Safeco Corporation
St. Paul Travelers Companies
State Farm Group
USAA
ADVERTISING AND PROMOTION
Figure 13: Total advertising expenditures by the P&C insurance industry, 1999-2004
Allstate
Farmers
GEICO
Nationwide
Progressive Insurance
Safeco
St. Paul Travelers
State Farm
USAA
THE CONSUMER
Introduction
Perceptions of leading personal property/casualty insurance companies
Figure 14: Personal property/casualty insurers described as “best overall,” by geographic region of respondent, March 2006
Figure 15: Personal property/casualty insurers described as “best overall”, by age of respondent, March 2006
Figure 16: Personal property/casualty insurers described as “best overall”, by race/ethnicity of respondent, March 2006
Figure 17: Personal property/casualty insurers described as “best overall,” by household income of respondent, March 2006
Perceptions of leading auto insurers
Figure 18: Auto insurers described as “reliable”, “expensive”, “affordable”, “trustworthy”, March 2006
Perceptions of leading homeowners/renters insurers
Figure 19: homeowners insurers described as “reliable”, “expensive”, “affordable”, “trustworthy”, March 2006
Renters versus homeowners insurance
Figure 20: Home rental/ownership, by age of respondent, March 2006
Figure 21: Home rental/ownership, by race/ethnicity of respondent, March 2006
Purchase of insurance among renters
Figure 22: Home rental/tenant insurance ownership by respondents who are renters, March 2006
Figure 23: Home rental/tenant insurance ownership by respondents who are renters, by age of respondent, March 2006
Figure 24: Home rental/tenant insurance ownership by respondents who are renters, by race/ethnicity of respondent, March 2006
Figure 25: Home rental/tenant insurance ownership by respondents who are renters, by household income of rental respondent, March 2006
Primary reason for not buying renters/tenants insurance
Figure 26: Primary reason for not buying renters/tenants insurance, March 2006
Figure 27: Primary reason for not buying renters/tenants insurance, by age of respondent, March 2006
Figure 28: Primary reason for not buying renters/tenants insurance, by race/ethnicity of respondent, March 2006
Figure 29: Primary reason for not buying renters/tenants insurance, by household income of respondent, March 2006
Preferred distribution channel
Figure 30: Preferred distribution channel, by geographic region of respondent, March 2006
Figure 31: Preferred distribution channel, by age of respondent, March 2006
Figure 32: Preferred distribution channel, by race/ethnicity of respondent, March 2006
Figure 33: Preferred distribution channel, by household income of respondent, March 2006
FUTURE AND FORECAST
 FUTURE TRENDS
 NEW ANSWERS TO EMERGING PROBLEMS
Catastrophic exposure
Figure 34: Catastrophe bond issuance and bonds outstanding, 2000-05
Tort costs
Figure 35: Graph: Total tort system costs as a percentage of GDP, 2000-06
Figure 36: Graph: Personal lines insurance tort costs, 1990-2004
The Terrorism Risk Insurance Act
Technological developments enhancing insurance underwriting and operations
Advertising and promotion
Factors impacting market forecasts
 MARKET FORECAST
Overview
Figure 37: Forecast of U.S. private auto insurance direct written premium, at current and constant prices, 2004-09
Figure 38: Forecast of U.S. homeowners insurance direct written premium, at current and constant prices, 2004-09
APPENDIX: TRADE ASSOCIATIONS
APPENDIX: ADVERTISING AND PROMOTION
Figure 39: Graph: Estimated mail volume, top ten direct mail advertisers, auto insurance, Q4 2005-Q1 2006
Figure 40: Allstate renters/tenants print advertisement, November 2005
Figure 41: Allstate “Your Choice” print advertisement, March 2006
Figure 42: GEICO affinity marketing direct mail piece, February 2006
Figure 43: GEICO Hispanic targeted ad, January 2006
Figure 44: GEICO Katrina ad, November 2005
Figure 45: Liberty Mutual homeowners, renters/tenants insurance direct mail ad, February 2006
Figure 46: Nationwide auto direct mail envelope, March 2006
Figure 47: Progressive auto insurance direct mail creative, March 2006
Figure 48: State Farm print ad, March 2006