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Trends, Challenges and Opportunities in P/C InsuranceFocus on New Jersey Markets
Agency Network ExchangeIselin, NJ
April 28, 2015Robert P. Hartwig, Ph.D., CPCU, President & Economist
Insurance Information Institute 110 William Street New York, NY 10038Tel: 212.346.5520 Cell: 917.453.1885 [email protected] www.iii.org
2
Insurance Industry:Financial Update & Outlook
2014 Was a Reasonably Good Year2015: A Repeat of 2014?
2
P/C Industry Net Income After Taxes1991–2014E 2005 ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 6.6% 2011 ROAS1 = 3.5% 2012 ROAS1 = 5.9% 2013 ROAS1 = 10.3% 2014 ROAS1 = 7.6%
• ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 7.7% ROAS through 2014:Q2, 9.8% ROAS in 2013, 6.2% ROAS in 2012, 4.7% ROAS for 2011, 7.6% for 2010 and 7.4% for 2009.
Sources: A.M. Best, ISO; Insurance Information Institute
$1
4,1
78
$5
,84
0
$1
9,3
16
$1
0,8
70
$2
0,5
98
$2
4,4
04 $3
6,8
19
$3
0,7
73
$2
1,8
65
$3
,04
6
$3
0,0
29
$6
2,4
96
$3
,04
3
$3
5,2
04
$1
9,4
56 $
33
,52
2
$6
3,7
84
$5
0,2
03
$3
8,5
01
$2
0,5
59
$4
4,1
55
$6
5,7
77
-$6,970
$2
8,6
72
-$10,000
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
14E
Net income rose strongly (+81.9%) in 2013 vs. 2012 on lower cats, capital gains
$ Millions
-5%
0%
5%
10%
15%
20%
25%
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
F1
6F
Profitability Peaks & Troughs in the P/C Insurance Industry, 1975 – 2016F
*Profitability = P/C insurer ROEs. 2011-14 figures are estimates based on ROAS data. Note: Data for 2008-2014 exclude mortgage and financial guaranty insurers.Source: Insurance Information Institute; NAIC, ISO, A.M. Best, Conning
1977:19.0%1987:17.3%
1997:11.6% 2006:12.7%
1984: 1.8% 1992: 4.5% 2001: -1.2%
10 Years
10 Years
9 Years
History suggests next ROE peak will be in 2016-2017, but that seems unlikely
ROE
1975: 2.4%
2013 10.4%
2014E 7.6%
2015F=6.5%
2016F=6.3%
6
ROE: Property/Casualty Insurance by Major Event, 1987–2014E
* Excludes Mortgage & Financial Guarantee in 2008 – 2014. 2014 figure is through Q3:2014. Sources: ISO, Fortune; Insurance Information Institute.
-5%
0%
5%
10%
15%
20%
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14*
P/C Profitability Is Both by Cyclicality and Ordinary Volatility
Hugo
Andrew
Northridge
Lowest CAT Losses in 15 Years
Sept. 11
Katrina, Rita, Wilma
4 Hurricanes
Financial Crisis*
(Percent)
Record Tornado Losses
Sandy
Low CATs
Modestly higher CATs
10
P/C Insurance Industry Combined Ratio, 2001–2014:Q3*
* Excludes Mortgage & Financial Guaranty insurers 2008--2014. Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=108.1; 2012:=103.2; 2013: = 96.1; 2014:9M = 97.7. Sources: A.M. Best, ISO.
95.7
99.3100.8
106.3
102.4
96.797.9
101.0
92.6
100.898.4
100.1
107.5
115.8
90
100
110
120
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
As Recently as 2001, Insurers Paid Out
Nearly $1.16 for Every $1 in Earned
PremiumsRelatively Low CAT Losses, Reserve Releases
Heavy Use of Reinsurance Lowered Net
Losses
Relatively Low CAT Losses, Reserve Releases
Avg. CAT Losses,
More Reserve Releases
Higher CAT
Losses, Shrinking Reserve
Releases, Toll of Soft
Market
Cyclical Deterioration
Sandy Impacts
Lower CAT
Losses
Best Combined
Ratio Since 1949 (87.6)
A 100 Combined Ratio Isn’t What ItOnce Was: Investment Impact on ROEs
Combined Ratio / ROE
* 2008 -2014 figures are return on average surplus and exclude mortgage and financial guaranty insurers. 2014:9M combined ratio including M&FG insurers is 97.7; 2013 = 96.1; 2012 =103.2, 2011 = 108.1, ROAS = 3.5%. Source: Insurance Information Institute from A.M. Best and ISO Verisk Analytics data.
97.5
100.6 100.1 100.8
92.7
101.299.5
101.0
96.797.9
102.4
106.5
95.7
14.3%
15.9%
12.7%
10.9%
7.4% 7.9%
4.7%6.2%
7.4%
9.6%8.8%
4.3%
9.8%
80
85
90
95
100
105
110
1978 1979 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014:Q30%
3%
6%
9%
12%
15%
18%
Combined Ratio ROE*
Combined Ratios Must Be Lower in Today’s DepressedInvestment Environment to Generate Risk Appropriate ROEs
A combined ratio of about 100 generates an ROE of ~7.0% in 2012/13, ~7.5% ROE in 2009/10,
10% in 2005 and 16% in 1979
Lower CATs helped ROEs
in 2013
12
Return on Net Worth (RNW) All Lines:2004-2013 Average
25
.6
18
.4
13
.4
13
.2
9.2
8.9
7.9
7.8
7.1
7.1
6.6
4.9
-1.0
-5
0
5
10
15
20
25
30
Fire
Inla
nd Mar
ine
All O
ther
Med
ical
Pro
f Lia
bility
Comm
Auto
Tota
l
Comm
erci
al MP
All Lin
es
Oth
er L
iabili
ty
Work
ers
Comp
PP Auto
Tota
l
Homeow
ners
MP
Farmow
ners
MP
Allied L
ines
Source: NAIC; Insurance Information Institute.
Commercial lines have tended to be more profitable than
personal lines over the past decade
13
RNW All Lines by State, 2004-2013 Average:Highest 25 States
20
.5
18
.4
14
.6
14
.3
13
.4
13
.3
12
.3
12
.1
12
.0
12
.0
11
.7
11
.4
11
.1
11
.1
10
.9
10
.8
10
.7
10
.7
10
.5
10
.5
10
.3
9.9
9.8
9.8
9.6
9.5
02468
1012141618202224
HI AK VT ME WY ND VA ID NH UT WA SC MA NC OH DC CA OR RI WV CT IA NE SD MT MD
The most profitable states over the past decade are
widely distributed geographically, though none
are in the Gulf region
Source: NAIC; Insurance Information Institute.
Profitability Benchmark: All P/C
US: 7.9%
14
9.2
8.6
8.4
8.3
8.2
8.2
8.1
8.0
7.9
7.7
7.7
7.5
7.4
6.8
6.6
6.4
6.1
5.7
5.3
5.2
5.0
4.3
2.5
1.9
-6.9
-9.3
-14-12-10
-8-6-4-202468
10
NM FL TX WI KS MN CO PA US AR IL IN AZ MO KY TN NV NJ GA NY DE MI AL OK MS LA
RNW All Lines by State, 2004-2013 Average: Lowest 25 States
Source: NAIC; Insurance Information Institute.
Some of the least profitable states over the past decade were hit hard
by catastrophes
16
Profitability and Growth in New Jersey P/C Insurance
Markets
Analysis by Line and Nearby State Comparisons
17
RNW All Lines: NJ vs. U.S., 2004-2013
Source: NAIC, Insurance Information Institute
-15%
-10%
-5%
0%
5%
10%
15%
20%
04 05 06 07 08 09 10 11 12 13
US All Lines NJ All Lines
(Percent)
Average 2004-2013US: 7.9%NJ: 5.7%
Superstorm Sandy caused profitability
to plummet to -9.0% in 2012
18
RNW PP Auto: NJ vs. U.S., 2004-2013
Source: NAIC, Insurance Information Institute
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
04 05 06 07 08 09 10 11 12 13
US PP Auto NJ PP Auto
Average 2004-2013US: 7.1%NJ: 6.1%
19
RNW Comm. Auto: NJ vs. U.S.,2004-2013
Source: NAIC, Insurance Information Institute
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
04 05 06 07 08 09 10 11 12 13
US Comm Auto NJ Comm Auto
(Percent)
Average 2004-2013US: 9.2%NJ: 5.7%
Superstorm Sandy damaged many commercial vehicles in 2012
20
RNW Comm. Multi-Peril: NJ vs. U.S.,2004-2013
Sources: NAIC, Insurance Information Institute
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
04 05 06 07 08 09 10 11 12 13
US Comm M-P NJ Comm M-P
(Percent)
Average 2004-2013US: 8.9%NJ: 6.3%
Superstorm Sandy caused profitability to plunge to -21.2%
in 2012
21
RNW Homeowners: NJ vs. U.S.,2004-2013
Source: NAIC, Insurance Information Institute
-40%
-30%
-20%
-10%
0%
10%
20%
30%
04 05 06 07 08 09 10 11 12 13
US HO NJ HO
(Percent)
Average 2004-2013US: 6.6%NJ: 7.1%
Superstorm Sandy caused HO
profitability to plunge to -31% in
2012
22
RNW Workers Comp: NJ vs. U.S.,2004-2013
Source: NAIC, Insurance Information Institute
0%
2%
4%
6%
8%
10%
12%
04 05 06 07 08 09 10 11 12 13
US WComp NJ Wcomp
(Percent)
Average 2004-2013US: 7.1%NJ: 4.1%
All Lines: 10-Year Average RNW NJ & Nearby States
6.7%
4.9%
4.8%
4.1%
7.1%
5.0%
0% 2% 4% 6% 8%
New Jersey
Connecticut
New York
Maryland
Pennsylvania
U.S.
2004-2013New Jersey All Lines profitability is below the US and regional
average
Source: NAIC, Insurance Information Institute
PP Auto: 10-Year Average RNW NJ & Nearby States
7.1%
8.3%
8.6%
9.2%
6.1%
7.7%
0% 2% 4% 6% 8% 10%
Connecticut
Maryland
New York
Pennsylvania
U.S.
New Jersey
2004-2013
New Jersey PP Auto profitability is below the US and regional
average
Source: NAIC, Insurance Information Institute
25
Top Ten Most Expensive And Least Expensive States For Automobile Insurance, 2012 (1)
RankMost
expensive statesAverage
expenditure RankLeast
expensive statesAverage
expenditure
1 New Jersey $1,219.93 1 Idaho $534.56
2 D.C. 1,154.91 2 South Dakota 556.51
3 New York 1,152.45 3 Iowa 561.26
4 Florida 1,127.93 4 North Dakota 576.08
5 Louisiana 1,112.53 5 Maine 582.43
6 Delaware 1,065.37 6 Wisconsin 598.84
7 Michigan 1,048.87 7 North Carolina 611.48
8 Rhode Island 1,034.50 8 Nebraska 616.78
9 Connecticut 986.73 9 Wyoming 618.81
10 Massachusetts 976.65 10 Kansas 632.07
(1) Based on average automobile insurance expenditures.
Source: © 2014 National Association of Insurance Commissioners.
New Jersey ranked 1st as the most expensive state in 2012, with an average expenditure for auto insurance of $1,219.
Comm. Auto: 10-Year Average RNW NJ & Nearby States
7.6%
9.2%
12.1%
12.9%
5.7%
9.1%
0% 5% 10% 15%
Maryland
Connecticut
U.S.
Pennsylvania
New York
New Jersey
Source: NAIC, Insurance Information Institute
2004-2013
New Jersey Commercial Auto
profitability is below the US and regional
average
Homeowners: 10-Year Average RNW NJ & Nearby States
7.1%
14.6%
14.7%
15.9%
6.6%
11.0%
0% 5% 10% 15% 20%
New York
Maryland
Connecticut
Pennsylvania
New Jersey
U.S.
Source: NAIC, Insurance Information Institute
2004-2013
New Jersey Homeowners profitability is above the
US and below the regional average
Workers Comp: 10-Year Average RNW NJ & Nearby States
6.7%
4.9%
4.8%
4.1%
7.1%
5.0%
0% 2% 4% 6% 8%
New Jersey
Connecticut
New York
Maryland
Pennsylvania
U.S.
Source: NAIC, Insurance Information Institute
2004-2013New Jersey Workers Comp profitability is
below the US average and regional
average
31
All Lines DWP Growth: NJ vs. U.S., 2004-2013
Source: SNL Financial.
7.5%
2.3% 3.
4%
0.5%
-2.1
%
-3.3
%
0.0%
3.7% 4.
6% 5.5%6.
4%
1.6%
0.7%
-1.4
%
-2.0
%
-1.9
% -0.2
%
3.1%
5.5% 6.
4%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
04 05 06 07 08 09 10 11 12 13
US DWP: All Lines NJ DWP All Lines
(Percent)
Average 2004-2013US: 2.2%NJ: 1.8%
32
Comm. Lines DWP Growth: NJ vs. U.S., 2004-2013
Source: SNL Financial.
9.7
%
3.2
%
4.9
%
-0.3
%
-3.8
%
-7.3
% -2.5
%
5.1
%
5.1
%
6.1
%8.8
%
3.4
%
2.2
%
-2.8
%
-3.7
%
-5.3
%
-4.9
%
2.9
% 6.6
%
8.2
%
-20%
-10%
0%
10%
20%
30%
04 05 06 07 08 09 10 11 12 13
US DWP: Comm. Lines NJ DWP Comm. Lines
(Percent)
Average 2004-2013US: 2.0%NJ: 1.5%
33
Personal Lines DWP Growth: NJ vs. U.S., 2004-2013
Source: SNL Financial.
5.2
%
2.0
%
2.6
%
1.2
%
-0.1
%
1.1
% 2.5
%
2.2
% 4.2
%
5.1
%
4.3
%
-0.6
%
-1.1
%
0.5
%
-0.1
%
2.5
% 4.8
%
3.2
%
4.2
%
4.5
%
-10%
-5%
0%
5%
10%
15%
20%
04 05 06 07 08 09 10 11 12 13
US DWP: Personal Lines NJ DWP: Personal Lines
(Percent)
Average 2004-2013US: 2.6%NJ: 2.2%
34
Private Passenger Auto DWP Growth: NJ vs. U.S., 2004-2013
Source: SNL Financial.
3.7%
0.1% 0.
8%
0.0%
-0.4
%
-0.1
% 1.5%
3.5% 4.
6%
2.7%
-2.6
%
-3.1
% -1.2
%
-1.4
%
1.9%
5.6%
2.8% 3.4%
3.6%
1.5%
-10%
-5%
0%
5%
10%
15%
04 05 06 07 08 09 10 11 12 13
US DWP: PP Auto NJ DWP: PP Auto
(Percent)
Average 2004-2013US: 1.5%NJ: 1.2%
35
Homeowner’s MP DWP Growth: NJ vs. U.S., 2004-2013
Source: SNL Financial.
10
.4%
7.4
%
7.4
%
4.2
%
0.5
%
3.8
%
4.9
%
3.8
% 5.7
%
6.2
%
11
.4%
7.8
%
6.6
%
6.3
%
4.1
%
4.3
%
2.6
% 4.3
% 6.6
%
7.2
%
0%
5%
10%
15%
20%
25%
04 05 06 07 08 09 10 11 12 13
US DWP: HO Lines NJ DWP: HO Lines
(Percent)
Average 2004-2013US: 5.4%NJ: 6.1%
INVESTMENTS: THE NEW REALITY
36
Investment Performance is a Key Driver of Profitability
Depressed Yields Will Necessarily Influence Underwriting & Pricing
36
Property/Casualty Insurance Industry Investment Income: 2000–20141
$38.9$37.1 $36.7
$38.7
$54.6
$51.2
$47.1 $47.6$49.2
$48.0 $47.4$45.7
$39.6
$49.5
$52.3
$30
$40
$50
$60
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14*
Due to persistently low interest rates,investment income fell in 2012, 2013 and 2014.
1 Investment gains consist primarily of interest and stock dividends. *2014 figure is estimated based on annualized data through Q3.Sources: ISO; Insurance Information Institute.
($ Billions) Investment earnings are still below their 2007 pre-crisis peak
Book Yield on Property/Casualty Insurance Invested Assets, 2007–2016F
4.42
4.19
3.95
3.71
3.283.20
3.13
3.74
3.523.38
3.0
3.2
3.4
3.6
3.8
4.0
4.2
4.4
4.6
07 08 09 10 11 12 13 14E 15F 16F
The yield on invested assets continues to decline as returns on maturing bonds generally still exceed new money yields. The end of the Fed’s QE program in Oct. 2014 should allow some increase
in longer maturities while short term interest rate increases are unlikely until mid-to-late 2015
Sources: Conning.
(Percent)
Book yield in 2014 is down 114 BP from pre-crisis levels
CAPITAL/CAPACITY
48
Capital Accumulation Has Multiple Impacts
48
49
Policyholder Surplus, 2006:Q4–2014:Q4E
Sources: ISO, A.M .Best.
($ Billions)
$487
.1
$496
.6
$512
.8
$521
.8
$478
.5
$455
.6
$437
.1 $463
.0 $490
.8 $511
.5 $540
.7
$530
.5
$544
.8
$559
.2
$559
.1
$538
.6
$550
.3
$567
.8
$583
.5
$586
.9 $607
.7
$614
.0
$624
.4 $653
.3
$671
.6
$673
.9
$675
.0
$662
.0
$570
.7
$566
.5
$505
.0
$515
.6
$517
.9
$400
$450
$500
$550
$600
$650
$700
06:Q
4
07:Q
1
07:Q
2
07:Q
3
07:Q
4
08:Q
1
08:Q
2
08:Q
3
08:Q
4
09:Q
1
09:Q
2
09:Q
3
09:Q
4
10:Q
1
10:Q
2
10:Q
3
10:Q
4
11:Q
1
11:Q
2
11:Q
3
11:Q
4
12:Q
1
12:Q
2
12:Q
3
12:Q
4
13:Q
1
13:Q
2
13:Q
3
13:Q
4
14:Q
1
14:Q
2
14:Q
3
14:Q
4
2007:Q3Pre-Crisis Peak
Surplus as of 12/31/14 stood at a record high $675B (est.)
2010:Q1 data includes $22.5B of paid-in capital from a holding company parent for one insurer’s investment in a non-insurance business .
The industry now has $1 of surplus for every $0.73 of NPW,close to the strongest claims-paying status in its history.
Drop due to near-record 2011 CAT losses
The P/C insurance industry entered 2015in very strong financial condition.
64
Performance by Segment
64
Private Passenger Auto Combined Ratio: 1993–2016F
10
1.7
10
1.3
10
1.3
10
1.0
10
9.5
10
7.9
10
4.2
98
.4
94
.3
95
.1
95
.5 98
.3 10
0.2
10
1.3
10
1.0
10
2.0
10
2.1
10
1.6
10
2.2
10
1.0
10
0.8
99
.5 10
1.1
10
3.5
80
85
90
95
100
105
110
115
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14E15F16F
Private Passenger Auto Accounts for 37% of Industry Premiums and Remains the Profit Juggernaut of the P/C Insurance Industry
65Sources: A.M. Best (1990-2013); Insurance Information Institute (2014F – 2015F).
Homeowners Insurance Combined Ratio: 1990–2015F
11
3.0
11
7.7
15
8.4
11
3.6
10
1.0 10
9.4
10
8.2
11
1.4 1
21
.7
10
9.3
98
.2
94
.4 10
0.3
89
.0 95
.6
11
6.6
10
5.8
10
6.9
12
2.3
10
4.1
94
.0
97
.5
99
.5
11
8.4
11
2.7 12
1.7
80
90
100
110
120
130
140
150
160
170
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14E 15F
1
Homeowners Performance in 2011/12 Impacted by Large Cat Losses. Extreme Regional Variation Can Be Expected Due to
Local Catastrophe Loss Activity
66
Hurricane Ike
Hurricane Sandy
Record tornado activity
Hurricane Andrew
Sources: A.M. Best (1990-2014F);Conning (2015F); Insurance Information Institute.
10
9.4
11
0.2
11
8.8
10
9.5 1
12
.5
11
0.2
10
7.6
10
4.1
10
9.7
11
0.2
10
2.5 1
05
.4
91
.1
93
.6
10
4.2
98
.9
10
2.4
10
7.9
10
3.4
98
.3 99
.9
98
.9
10
2.0
11
1.1
11
2.3
12
2.3
90
95
100
105
110
115
120
125
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
F
14
F
15
F
Co
mm
erc
ial L
ine
s C
om
bin
ed
Ra
tio
*2007-2012 figures exclude mortgage and financial guaranty segments.Source: A.M. Best (1990-2014F); Conning (2015F) Insurance Information Institute.
Commercial Lines Combined Ratio, 1990-2015F*
Commercial lines underwriting
performance is expected to improve as
improvement in pricing environment persists
67
Commercial Auto Combined Ratio: 1993–2015F
11
2.1
11
2.0
11
3.0
11
5.9
10
2.7
95
.2
92
.9
92
.1
92
.4
94
.1 96
.8 99
.1
97
.8
10
3.4 10
6.8
10
6.5
10
6.4
10
5.2
11
8.1
11
5.7
11
6.2
80
85
90
95
100
105
110
115
120
125
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14E 15F
Commercial Auto is Expected to Improve Only Slowly as Rate Gains Barely Offset Adverse Frequency and Severity Trends
68Sources: A.M. Best (1990-2014E);Conning (2015F); Insurance Information Institute.
Commercial Property Combined Ratio: 2007–2016F
72.4
105.
8
83.3 86
.5
85.4 89
.4
90.1
106.
5
105.
8
82.7
70
75
80
85
90
95
100
105
110
07 08 09 10 11 12 13 14E 15F 16F
Commercial Property Underwriting Performance Has Been Volatile in Recent Years, Largely Due to
Fluctuations in CAT Activity
Source: Conning Research and Consulting. 69
General Liability Combined Ratio: 2005–2015F
112.
9
95.1 99
.0
94.2
104.
1
101.
4
103.
0
103.
9107.
1 110.
8
99.8
80
85
90
95
100
105
110
115
05 06 07 08 09 10 11 12 13F 14F 15F
Commercial General Liability Underwriting Performance Has Been Volatile in Recent Years
Source: Conning Research and Consulting. 70
Workers Compensation Combined Ratio: 1994–2014E
102.
0
97.0 10
0.0
101.
0
112.
6
108.
6
105.
1
102.
7
98.5
103.
5
104.
5 110.
6 115.
0
115.
0
108.
0
101.
0
96.0
121.
7
107.
0
115.
3
118.
2
80
85
90
95
100
105
110
115
120
125
130
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14F
Workers Comp Results Began to Improve in 2012. Underwriting Results Deteriorated Markedly from 2007-
2010/11 and Were the Worst They Had Been in a Decade. Sources: A.M. Best (1994-2009); NCCI (2010-2014F) and are for private carriers only; Insurance Information Institute. 71
WC results have improved markedly
since 2011
74
Growth Analysis by State and Business Segment
Post-Crisis Paradox? Premium Growth Rates Vary
Tremendously by State
74
75
-5%
0%
5%
10%
15%
20%
25%
71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 1415
F14
F
Net Premium Growth: Annual Change, 1971—2016F
(Percent)1975-78 1984-87 2000-03
*Actual figure based on data through Q3 2014.Shaded areas denote “hard market” periodsSources: A.M. Best (historical and forecast), ISO, Insurance Information Institute.
Net Written Premiums Fell 0.7% in 2007 (First Decline
Since 1943) by 2.0% in 2008, and 4.2% in 2009, the First 3-Year Decline Since 1930-33.
2015-16F: 4.0%
2014E: 4.0%*
2013: 4.6%
2012: +4.3%
77
Direct Premiums Written: Total P/CPercent Change by State, 2007-2013
74
.6
36
.9
31
.9
27
.4
25
.2
24
.9
22
.5
22
.2
16
.6
15
.9
15
.7
14
.5
14
.5
14
.3
12
.6
11
.9
11
.8
11
.2
10
.5
10
.3
9.9
9.8
9.3
9.1
9.0
8.6
0
10
20
30
40
50
60
70
80
ND
SD
OK
NE
KS IA VT
TX
WY
TN
MN
AR
AK IN WI
CO M
I
KY
OH NJ
LA
SC VA
AL
MO
NM
Pe
ce
nt
ch
an
ge
(%
)
Sources: SNL Financial LC.; Insurance Information Institute.
Top 25 StatesNorth Dakota was the country’s growth leader over the past 6 years with premiums written
expanding by 74.6%, fueled by the state’s energy boom
Growth Benchmarks: Total P/C
US: 7.9%
78
Direct Premiums Written: Total P/CPercent Change by State, 2007-2013
8.5
8.2
7.9
7.8
7.6
7.3
7.0
6.9
6.2
5.9
5.6
5.3
4.2
4.1
3.5
1.6
1.0
0.4
-0.7
-1.7
-1.9
-4.1
-5.7
-6.7
-12
.6
-15
.3
-20
-15
-10
-5
0
5
10
MS
CT
US
NC
GA
NY
MD
MA
UT
WA
PA IL RI
NH ID MT
ME
OR
CA
FL
DC AZ
WV HI
NV
DE
Pe
ce
nt
ch
an
ge
(%
)
Bottom 25 States
Sources: SNL Financial LC.; Insurance Information Institute.
Growth was negative in 7 states and DC between
2007 and 2013
79
Direct Premiums Written: PP AutoPercent Change by State, 2007-2013
34
.1
26
.7
25
.8
24
.0
19
.7
18
.7
16
.8
15
.5
14
.9
14
.6
14
.4
14
.3
14
.2
14
.1
13
.8
13
.7
13
.6
13
.5
13
.5
12
.3
11
.4
10
.9
10
.7
10
.6
10
.5
10
.4
0
5
10
15
20
25
30
35
40
ND
TX MI
OK
SD
NE
NJ
TN
CO
KS FL IA KY WI
DE
UT VA
SC
NY LA
AR
US
MT
MO
WY
AL
Pe
ce
nt
ch
an
ge
(%
)
Sources: SNL Financial LC.; Insurance Information Institute.
Top 25 States
Growth Benchmarks: PPA
US: 10.9%
80
Direct Premiums Written: PP AutoPercent Change by State, 2007-2013
10.3
10.3
10.1
9.7
9.4
9.0
8.9
8.8
8.6
7.4
6.5
6.1
6.1
6.1
5.8
5.3
5.1
5.0
4.6
2.0
0.8
-0.2
-0.3
-0.9
-3.7
-6.0
-8
-6
-4
-2
0
2
4
6
8
10
12
AK
DC
NC
OR
MN IN GA
MD
WV
OH
MS
MA
NM CT
WA
PA IL RI
ID VT
CA
NV
NH AZ
HI
ME
Pe
ce
nt
ch
an
ge
(%
)
Bottom 25 States
Sources: SNL Financial LC.; Insurance Information Institute.
Pvt. Passenger Auto premium growth was negative in 5 states
between 2007 and 2013
81
Monthly Change in Auto Insurance Prices, 1991–2015*
*Percentage change from same month in prior year; through February 2015; seasonally adjustedNote: Recessions indicated by gray shaded columns.Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes.
-2%
0%
2%
4%
6%
8%
10%
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Cyclical peaks in PP Auto tend to occur roughly every 10 years (early
1990s, early 2000s and likely the early 2010s)
“Hard” markets tend to occur
during recessionary
periods
Pricing peak occurred in late
2010 at 5.3%, falling to 2.8% by Mar. 2012
Feb. 2015 reading of 5.6% is up from 3.4%
a year earlier
83
Average Expenditures on Auto Insurance
$651$668
$691$705
$726
$786
$830$842
$831$816
$795$789 $787 $792 $798$815
$835$856
$877
$690$685$703
$600
$650
$700
$750
$800
$850
$900
$950
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13E
14E
15F
Countrywide Auto Insurance Expenditures decreased by 6.5% from 2004 through 2009, rising gradually since the with annual increases
in the 2.0% to 2.5% range* Insurance Information Institute Estimates/Forecasts
Source: NAIC, Insurance Information Institute estimate for 2013-2015 based on CPI and other data.
The average expenditure on auto insurance remained below 2004 until 2013
Advertising Expenditures by P/C Insurance Industry, 1999-2013
$1.736 $1.737 $1.803 $1.708
$3.426
$4.102$4.354
$4.103
$5.079
$5.883$6.088 $6.175
$2.975
$2.111$1.882
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$5.0
$5.5
$6.0
$6.5
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Source: Insurance Information Institute from consolidated P/C Annual Statement data, Insurance Expense Exhibit (Part I).
$ Billions P/C ad spend hit an all time record high of $6.175 billion in 2013, up 1.5% over 2012.
The pace of growth has slowed from 15.8% in 2011
and 23.8% in 2010
P/C ad spending has more than tripled since 2002
(up 256% from 2002-2013)
86
Direct Premiums Written: HomeownersPercent Change by State, 2007-2013
60.5
53.3
50.7
50.7
50.5
49.2
46.3
45.4
45.4
44.7
44.0
43.5
42.9
42.5
42.1
41.9
40.3
38.1
37.1
37.1
35.7
34.9
34.1
33.6
33.0
32.6
0
10
20
30
40
50
60
70
OK
ND
MN
AR
TN
SD
MO
CO
KY
KS WI
WY
NE IA GA
MT
TX
NM
OH IN AL IL SC
DE
UT ID
Pe
ce
nt
ch
an
ge
(%
)
Sources: SNL Financial LLC.; Insurance Information Institute.
Top 25 States
Growth Benchmarks: HO
US: 26.8%
87
Direct Premiums Written: HomeownersPercent Change by State, 2007-2013
32
.6
32
.5
31
.4
30
.6
30
.4
30
.3
29
.8
29
.6
27
.5
27
.2
26
.8
26
.4
25
.3
24
.6
22
.5
22
.3
20
.8
19
.7
19
.2
17
.2
16
.1
15
.4
8.3
8.0
2.1
0.5
0
5
10
15
20
25
30
35
40
MS
NC VA
NJ
CT RI
LA
PA
WV
WA
US
NH
ME
MD
NY
OR
MA
AK
DC AZ
VT MI
HI
CA
FL
NV
Pe
ce
nt
ch
an
ge
(%
)
Bottom 25 States
Sources: SNL Financial LLC.; Insurance Information Institute.
The collapse of the housing bubble hit CA, FL and NV hard, leading
to the slowest growth rates in the US between
2007 and 2013
88
Direct Premiums Written: Comm. LinesPercent Change by State, 2007-2013
91
.1
42
.1
41
.4
33
.7
26
.3
25
.8
23
.6
19
.1
15
.6
14
.0
11
.3
10
.0
9.8
6.8
6.7
6.5
4.1
3.2
3.1
3.0
2.7
2.2
2.0
1.7
1.3
0.6
0
10
20
30
40
50
60
70
80
90
100
ND
OK
SD VT
NE IA KS ID AK
TX
WY
MN IN AR
TN W
I
OH
MA
CT
NM LA
MS
NJ
NY
US
MO
Pe
ce
nt
ch
an
ge
(%
)
Sources: SNL Financial LLC.; Insurance Information Institute.
Top 25 States
Only 30 states showed any
commercial lines growth from 2007
through 2013
Growth Benchmarks: Commercial
US: 1.3%
89
Direct Premiums Written: Comm. LinesPercent Change by State, 2007-2013
0.5
0.4
0.2
0.1
-0.5
-0.8
-0.9
-1.0
-1.1
-1.1
-1.9
-2.0
-2.1
-2.7
-3.3
-3.7
-4.3
-4.9
-10
.7
-11
.4
-11
.7
-12
.6
-12
.7
-13
.6
-22
.4
-25
.1
-30
-25
-20
-15
-10
-5
0
5
MD
NH PA
CO IL
WA
VA
KY
NC
ME RI
MI
SC AL
GA
CA
UT
DC
OR
MT HI
DE FL AZ
WV
NV
Pe
ce
nt
ch
an
ge
(%
)
Bottom 25 States
Sources: SNL Financial LLC.; Insurance Information Institute.
States with the poorest performing economies also produced the most negative
net change in premiums of the past 6 years
Nearly half the states have yet to see commercial lines premium
volume return to pre-crisis levels
94
Commercial Lines Pricing Trends
Survey Results Suggest Commercial Pricing Has
Flattened Out
94
95
Average Commercial Rate Change,All Lines, (1Q:2004–1Q:2015)
-3.2
%-5
.9%
-7.0
%-9
.4%
-9.7
% -8.2
%-4
.6% -2
.7%
-3.0
%-5
.3%
-9.6
%-1
1.3
%-1
1.8
%-1
3.3
%-1
2.0
%-1
3.5
%-1
2.9
%-1
1.0
%-6
.4%
-5.1
%-4
.9%
-5.8
%-5
.6%
-5.3
%-6
.4%
-5.2
%-5
.4% -2
.9%
2.7
% 4.4
%4
.3%
3.9
% 5.0
%5
.2%
4.3
%3
.4%
2.1
%1
.5%
-0.5
%0
.1%
-0.7
%-1
.5%-0
.1%
0.9
%
-0.1
%
-16%
-11%
-6%
-1%
4%
9%
1Q
04
2Q
04
3Q
04
4Q
04
1Q
05
2Q
05
3Q
05
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
4Q
14
1Q
15
Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially.
Source: Council of Insurance Agents & Brokers; Insurance Information Institute
KRW Effect
Pricing as of Q1:2015 had turned (slightly) negative for only the 3rd time in 3 years
(Percent)
Q2 2011 marked the last of 30th
consecutive quarter of price declines
99
Change in Commercial Rate Renewals, by Line: 2015:Q1
Source: Council of Insurance Agents and Brokers; Insurance Information Institute.
Major Commercial Lines Renewals Were Mixed to Flat in Q1:2015; EPL and Commercial Auto Led the Way
Percentage Change (%)
-0.2%
1.4% 1.5%
2.4%
-4.0%
-2.2% -2.2% -2.1%
-0.7% -0.4%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
Co
mm
erc
ial
Pro
pe
rty
Bu
sin
ess
Inte
rru
ptio
n
Ge
ne
ral
Lia
bili
ty
Um
bre
lla
Co
nst
ruct
ion
Wo
rke
rsC
om
p
Su
rety
D&
O
Co
mm
erc
ial
Au
to EP
L
Employment Practices rate increases are large
than any other line, followed by Commercial
Auto and D&O
Note: CIAB data cited here are based on a survey. Rate changes earned by individual insurers can and do vary, potentially substantially.
100
U.S. Insured Catastrophe Loss Update
2013/14 Experienced Below Average CAT Activity After Very High CAT Losses in
2011/12Winter Storm Losses Far Above Average in
2014 and 2015100
101
$1
2.8
$1
1.1
$3
.8
$1
4.5
$1
1.7
$6
.2
$3
5.2
$7
.7
$1
6.5
$3
4.2
$7
4.5
$1
0.7
$7
.6
$2
9.6
$1
1.6
$1
4.6
$3
4.1
$3
5.5
$1
2.9
$1
5.3
$1
4.2
$4
.9 $8
.1
$3
8.3
$8
.9
$2
6.8
$0
$10
$20
$30
$40
$50
$60
$70
$80
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
U.S. Insured Catastrophe Losses
*Through 12/31/14.Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01 ($25.9B 2011 dollars). Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B ($15.6B in 2011 dollars.) Sources: Property Claims Service/ISO; Insurance Information Institute.
2013 Was a Welcome Respite from 2012, the 3rd Costliest Year for Insured Disaster Losses in US
History. Longer-term Trend is for more—not fewer—Costly Events
2012 was the 3rd most expensive year ever for
insured CAT losses
$15.3 billion in insured CAT
losses estimated for 2014
($ Billions, $ 2013)
101
104
Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, 1994–20131
0.1%
1.4%
3.8%4.8%
6.4%
6.4%
36.0%
41.1%
1. Catastrophes are defined as events causing direct insured losses to property of $25 million or more in 2013 dollars.2. Excludes snow.3. Does not include NFIP flood losses4. Includes wildland fires5. Includes civil disorders, water damage, utility disruptions and non-property losses such as those covered by workers compensation.Source: ISO’s Property Claim Services Unit.
Hurricanes & Tropical Storms, $159.1
Fires (4), $5.5
Events Involving Tornadoes (2), $139.3
Winter Storms, $24.7
Terrorism, $24.8
Geological Events, $18.4
Wind/Hail/Flood (3), $14.6
Other (5), $0.2
Wind losses are by far cause the most catastrophe losses,
even if hurricanes/TS are excluded.
Tornado share of CAT losses is
rising
Insured cat losses from 1993-2012
totaled $386.7B, an average of $19.3B per year or $1.6B
per month
Winter storm losses were much above average in
2014/15 and will push this
share up
Loss events in the US, 1980 – 2014Insured losses due to winter storms*
Insured losses (in 2014 values)**
**Losses adjusted to inflation based on country CPI
5 year Mean
*Winter storms include winter damage, blizzard, snow storm and cold wave
Overall losses in 2014 totaled $3.7B; Insured losses totaled $ 2.4BPreliminary figures for 2015 suggest $2.3B in insured winter storm losses.
105
1 000
2 000
3 000
4 000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Source: Property Claim Services, MR NatCatSERVICE.
$ Billions
106
Top 16 Most Costly Disastersin U.S. History
(Insured Losses, 2013 Dollars, $ Billions)
$7.9 $8.8 $9.3 $11.2$13.6
$19.0$24.2 $24.9$25.9
$49.4
$7.6$7.2$6.8$5.7$5.6$4.5
$0
$10
$20
$30
$40
$50
$60
Irene (2011) Jeanne(2004)
Frances(2004)
Rita (2005)
Tornadoes/T-Storms
(2011)
Tornadoes/T-Storms
(2011)
Hugo (1989)
Ivan (2004)
Charley(2004)
Wilma(2005)
Ike (2008)
Sandy*(2012)
Northridge(1994)
9/11 Attack(2001)
Andrew(1992)
Katrina(2005)
Superstorm Sandy in 2012 was the last
mega-CAT to hit the US
Includes Tuscaloosa, AL,
tornado
Includes Joplin, MO, tornado
12 of the 16 Most Expensive Events in US History Have
Occurred Over the Past Decade
Sources: PCS; Insurance Information Institute inflation adjustments to 2013 dollars using the CPI.
111
Federal Disaster Declarations Patterns:
1953-2015
111
Disaster Declarations Set New Records in Recent Years
Number of Federal Major Disaster Declarations, 1953-2015*
13 1
7 18
16
16
7 71
21
22
22
0 25
25
11
11
19
29
17
17
48
46
46
38
30
22 2
54
22
31
52
42
13
42
7 28
23
11
31
38
45
32 3
63
27
54
46
55
04
54
5 49
56
69
48 5
26
37
55
98
19
94
75
55
41
1
43
0
20
40
60
80
100
120
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
*
*Through April 21, 2015.Source: Federal Emergency Management Administration; http://www.fema.gov/disasters; Insurance Information Institute.
The Number of Federal Disaster Declarations Is Rising and Set New Records in 2010 and 2011 Before Dropping in 2012-2014
The number of federal disaster declarations set a new record in 2011, with 99, shattering 2010’s
record 81 declarations.
There have been 2,216 federal disaster
declarations since 1953. The average
number of declarations per year is 35 from 1953-2014, though
there few haven’t been recorded since 1995.
11 federal disasters have declared so far in 2015*, mostly for winter storms
112
113
Federal Disasters Declarations by State, 1953 – 2015: Highest 25 States*
88
80
75
69
67
60
58
57
56
56
55
54
54
53
52
51
51
50
50
49
47
47
45
43
41
0
10
20
30
40
50
60
70
80
90
100
TX CA OK NY FL LA AL KY AR MO IA MS TN IL WV MN NE KS PA WA OH VA ND SD ME
Dis
as
ter
De
cla
rati
on
s
Over the past 60 years, Texas has had the highest number of Federal Disaster
Declarations
*Through April 10, 2015. Includes Puerto Rico and the District of Columbia.Source: FEMA: http://www.fema.gov/news/disaster_totals_annual.fema; Insurance Information Institute.
114
Federal Disasters Declarations by State, 1953 – 2015: Lowest 25 States*
43
40
40
39
38
37
35
34
30
29
28
28
27
26
25
25
24
23
22
20
17
17
15
13
12
11
9
0
10
20
30
40
50
NC AK IN GA VT WI NJ NH MA OR HI NM MI PR MD MT AZ ID CO CT NV SC DE DC RI UT WY
Dis
as
ter
De
cla
rati
on
s
Over the past 60 years, Wyoming and Utah had
the fewest number of Federal Disaster
Declarations
*Through April 21, 2015. Includes Puerto Rico and the District of Columbia.Source: FEMA: http://www.fema.gov/news/disaster_totals_annual.fema; Insurance Information Institute.
The Strength of the Economy Will Influence P/C Insurer
Growth Opportunities
119
Growth Will Expand Insurer Exposure Base Across Most Lines
119
120
US Real GDP Growth*
* Estimates/Forecasts from Blue Chip Economic Indicators.Source: US Department of Commerce, Blue Economic Indicators 4/15; Insurance Information Institute.
2.7%
1.8%
-1.8
%1.
3%-3
.7%
-5.3
%-0
.3%
5.0%
2.3%
2.2% 2.6%
2.4%
0.1%
2.5%
1.3%
4.1%
2.0%
1.3%
3.1%
0.4%
2.7%
1.8%
3.5%
-2.1
%4.
6% 5.0%
2.2%
2.4% 3.
1%3.
0%2.
9%2.
8%2.
8%2.
8%2.
7%
-8.9%
4.5%
1.4%
4.1%
1.1% 1.
8% 2.5% 3.
6%3.
1%
-9%
-7%
-5%
-3%
-1%
1%
3%
5%
7%
2
00
0
2
00
1
2
00
2
2
00
3
2
00
4
2
00
5
2
00
6
2
00
7
08
:1Q
08
:2Q
08
:3Q
08
:4Q
09
:1Q
09
:2Q
09
:3Q
09
:4Q
10
:1Q
10
:2Q
10
:3Q
10
:4Q
11
:1Q
11
:2Q
11
:3Q
11
:4Q
12
:1Q
12
:2Q
12
:3Q
12
:4Q
13
:1Q
13
:2Q
13
:3Q
13
:4Q
14
:1Q
14
:2Q
14
:3Q
14
:4Q
15
:1Q
15
:2Q
15
:3Q
15
:4Q
16
:1Q
16
:2Q
16
:3Q
16
:4Q
Demand for Insurance Should Increase in 2015 as GDP Growth Accelerates Modestly and Gradually Benefits the Economy Broadly
Real GDP Growth (%)
Recession began in in June
2009
The Q4:2008 decline was the steepest since the Q1:1982 drop of 6.8%
Q1 2014 GDP data were hit hard by this
year’s “Polar Vortex” and harsh
winter
122
Real GDP by State Percent Change, 2013:Highest 25 States
9.7
7.6
5.1
4.2
4.1
3.8
3.8
3.7
3.1
3.0
3.0
2.9
2.8
2.7
2.7
2.4
2.3
2.2
2.1
2.0
2.0
1.9
1.9
1.9
1.8
1.8
0
1
2
3
4
5
6
7
8
9
10
ND WY WV OK ID CO UT TX SD NE MT IA MN OR WA AR NC FL IN MI CA VT KS HI GA US
Pe
rce
nt
Ch
an
ge
(%
)
Sources: U.S. Bureau of Economic Analysis; Insurance Information Institute.
North Dakota was the economic growth juggernaut of the US
in 2013—by far
Only 9 states experienced growth in excess of 3% in 2013, which is what we would see nationally in a
more typical recovery
Growth Benchmarks: Real GDP
US: 1.8%
123
1.8
1.7
1.6
1.6
1.6
1.6
1.5
1.4
1.3
1.2
1.1
1.1
1.0
0.9
0.9
0.9
0.9
0.8
0.8
0.8
0.7
0.7
0.1
0.0
-0.5
-2.5
-3.0-2.5-2.0-1.5-1.0-0.50.00.51.01.52.02.5
OH WI MA DE KY MS NM RI LA SC NJ AZ NV CT ME NH IL MO AL TN NY PA VA MD DC AL
Pe
rce
nt
Ch
an
ge
(%
)Real GDP by State Percent Change, 2013: Lowest 25 States
Sources: US Bureau of Economic Analysis; Insurance Information Institute.
DC and Alabama were the only
states to shrink in 2013
Growth rates in 11 states were still below 1% in
2013
126
16.9
16.5
16.1
13.2
10.4
11.6
12.7
14.4
15.5 16
.4 16.8
17.0
16.9
16.8
16.9
16.8
16.7
16.9
16.617
.117.5
17.8
17.4
9
10
11
12
13
14
15
16
17
18
19
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F 19F 20F 21F
(Millions of Units)
Auto/Light Truck Sales, 1999-2021F
Source: U.S. Department of Commerce; Blue Chip Economic Indicators (4/15 and 3/15); Insurance Information Institute.
New auto/light truck sales fell to the lowest level since the late 1960s. Forecast for 2014-15 is
still below 1999-2007 average of 17 million units, but a robust recovery is well underway.
Job growth and improved credit market conditions will boost auto sales in
2014 and beyond
Truck purchases by contractors are
especially strong
Yearly car/light truck sales will likely continue at current levels, in part replacing cars that were held onto in 2008-12. New vehicles will generate more physical damage insurance coverage but will be more expensive to
repair. PP Auto premium might grow by 5% - 6%.
Sales have returned to pre-
crisis levels
129
(Millions of Units)
New Private Housing Starts, 1990-2021F
1.4
81
.47 1
.62
1.6
41
.57
1.6
0 1.7
1 1.8
5 1.9
6 2.0
71
.80
1.3
60
.91
0.5
50
.59
0.6
1 0.7
8 0.9
21
.01 1
.16 1.3
0 1.4
11
.46
1.4
91
.52
1.5
2
1.3
51.4
61
.29
1.2
0
1.0
11.1
9
0.3
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F 19F20F 21F
Source: U.S. Department of Commerce; Blue Chip Economic Indicators (3/15); Insurance Information Institute.
Insurers Are Continue to See Meaningful Exposure Growth in the Wake of the “Great Recession” Associated with Home Construction: Construction Risk
Exposure, Surety, Commercial Auto; Potent Driver of Workers Comp Exposure
New home starts plunged 72% from 2005-2009; A net
annual decline of 1.49 million units, lowest since records began
in 1959
Job growth, low inventories of existing homes, low mortgage rates and demographics should continue to stimulate new home construction
for several more years
134
43,6
9448
,125
69,3
0062
,436
64,0
04 71,2
77 81,2
3582
,446
63,8
5363
,235
64,8
53 71,5
4970
,643
62,3
0452
,374
51,9
5953
,549
54,0
2744
,367
37,8
8435
,472
40,0
9938
,540
35,0
3734
,317
39,2
0119
,695 28
,322
43,5
4660
,837
56,2
8247
,806
40,0
7533
,212
26,9
83
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Business Bankruptcy Filings,1980-2014
Sources: American Bankruptcy Institute (1980-2012) at http://www.abiworld.org/AM/AMTemplate.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=61633; 2013-14 data from United States Courts at http://news.uscourts.gov; Insurance Information Institute.
Significant Exposure Implications for All Commercial Lines as Business Bankruptcies Begin to Decline
2014 bankruptcies totaled 26,983, down 18.8% from 2013—the 5th consecutive year of decline.
Business bankruptcies more than tripled during the financial crisis.
% Change Surrounding Recessions
1980-82 58.6%1980-87 88.7%1990-91 10.3%2000-01 13.0%2006-09 208.9%
134
CONSTRUCTION INDUSTRY OVERVIEW & OUTLOOK
138
The Construction Sector Is Critical to the Economy and the P/C Insurance Industry
138
139
Value of New Private Construction: Residential & Nonresidential, 2003-2015*
Billions of Dollars
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
03 04 05 06 07 08 09 10 11 12 13 14 15*
Non ResidentialResidential
Private Construction Activity Is Moving in a Positive Direction though Remains Well Below Pre-Crisis Peak; Residential Dominates
$298.1
$15.0
$613.7
New Construction peaks at $911.8. in 2006
Trough in 2010 at $500.6B,
after plunging 55.1% ($411.2B)
2014: Value of new pvt. construction hits $698.2B as of Feb. 2015, up 40%
from the 2010 trough but still 23% below 2006 peak
139
$261.8
$238.8
$348.4
$349.9
*2015 figure is a seasonally adjusted annual rate as of February.Sources: US Department of Commerce http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.
140
Value of Construction Put in Place, Feb. 2015 vs. Feb. 2014*
3.1%
13.9%
2.9%2.1% 1.8%
-2.1%
5.9%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
TotalConstruction
Total PrivateConstruction
Residential--Private
Non-Residential--
Private
Total PublicConstruction
Residential-Public
Non-Residential--
Public
Overall Construction Activity is Up, But Growth In the Private Sector Slowed in Late 2014 While Picking in the State/Local Sector Government
Sector as Budget Woes Ease in Some Jurisdictions
Growth (%)
Private sector construction activity is up in the
residential and nonresidential segments but
growth is sluggish
*seasonally adjustedSource: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.
Private: +1.8% Public: +3.1%Public sector
construction activity is finally beginning to pick up after years of
decline
146
Construction Employment,Jan. 2010—December 2014*
*Seasonally adjusted.Sources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.
5,58
15,
522
5,54
25,
554
5,52
75,
512
5,49
75,
519
5,49
95,
501
5,49
75,
468
5,43
55,
478
5,48
55,
497
5,52
45,
530
5,54
75,
546
5,58
35,
576
5,57
75,
612
5,62
95,
644
5,64
05,
636
5,61
55,
622
5,62
75,
630
5,63
35,
649
5,67
35,
711
5,73
5 5,78
35,
799
5,79
25,
791
5,80
15,
804
5,80
55,
822
5,83
05,
849
5,87
6 5,92
75,
927
5,96
46,
000
6,00
96,
017
6,04
76,
064
6,08
26,
098
6,11
8 6,16
6
5,400
5,500
5,600
5,700
5,800
5,900
6,000
6,100
6,200
6,300
Jan-
10Fe
b-10
Mar
-10
Apr
-10
May
-10
Jun-
10Ju
l-10
Aug
-10
Sep
-10
Oct
-10
Nov
-10
Dec
-10
Jan-
11Fe
b-11
Mar
-11
Apr
-11
May
-11
Jun-
11Ju
l-11
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
122/
30/2
Mar
-12
Apr
-12
May
-12
Jun-
12Ju
l-12
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Jan-
13Fe
b-13
Mar
-13
Apr
-13
May
-13
Jun-
13Ju
l-13
Aug
-13
Sep
-12
Oct
-13
Nov
-13
Dec
-13
Jan-
14Fe
b-14
Mar
-14
Apr
-14
May
-14
Jun-
14Ju
l-14
Aug
-14
Sep
-14
Oct
-14
Nov
-14
Dec
-14
Construction employment is +731,000 above
Jan. 2011 (+13.4%) trough
(Thousands)
Construction and manufacturing employment constitute 1/3 of all WC payroll exposure.
MANUFACTURING SECTOR OVERVIEW & OUTLOOK
152
The U.S. Is Experiencing a Mini Manufacturing Renaissance but Headwinds from Weak Export
Markets and Strong Dollar152
153
$200,000
$300,000
$400,000
$500,000
Dollar Value* of Manufacturers’ Shipments Monthly, Jan. 1992—February 2015
* Seasonally adjusted; Data published Apr. 2, 2015.Source: U.S. Census Bureau, Full Report on Manufacturers’ Shipments, Inventories, and Orders, http://www.census.gov/manufacturing/m3/
Monthly shipments in Feb. 2015 are similar to pre-crisis (July 2008) peak but has declined in recent months. Manufacturing is energy-intensive and growth leads to
gains in many commercial exposures: WC, Commercial Auto, Marine, Property, and various Liability Coverages.
$ Millions
153
The value of Manufacturing Shipments in Feb. 2015 was
$481.3B—down slightly since the July 2014 record high of $508.1B
160
Labor Market Trends
Massive Job Losses Sapped the Economy and Commercial/Personal
Lines Exposure, But Trend Has Greatly Improved
160
161
Unemployment and Underemployment Rates: Still Too High, But Falling
2
4
6
8
10
12
14
16
18
Jan00
Jan01
Jan02
Jan03
Jan04
Jan05
Jan06
Jan07
Jan08
Jan09
Jan10
Jan11
Jan12
Jan13
Jan14
Jan15
"Headline" Unemployment Rate U-3
Unemployment + Underemployment RateU-6
“Headline” unemployment
was 5.5% in Mar. 2015. 4.5% to
5.5% is “normal.”
Source: US Bureau of Labor Statistics; Insurance Information Institute.
January 2000 through March 2015, Seasonally Adjusted (%)
Stubbornly high unemployment and underemployment constrain overall economic growth, but the job market is now clearly improving.
161
U-6 soared from 8.0% in March
2007 to 17.5% in October 2009; Stood at 10.9%
in Mar. 2015.8% to 10% is
“normal.”
162
US Unemployment Rate Forecast4
.5%
4.5
%4
.6%
4.8
%4
.9% 5.4
% 6.1
%6
.9%
8.1
%9
.3%
9.6
% 10
.0%
9.7
%9
.6%
9.6
%
8.9
%9
.1%
9.1
%8
.7%
8.3
%8
.2%
8.0
%7
.8%
7.7
%7
.6%
7.3
%7
.0%
6.6
%6
.2%
6.1
%5
.7%
5.6
%5
.4%
5.3
%5
.2%
5.1
%5
.0%
5.0
%4
.9%
9.6
%
4%
5%
6%
7%
8%
9%
10%
11%
07
:Q1
07
:Q2
07
:Q3
07
:Q4
08
:Q1
08
:Q2
08
:Q3
08
:Q4
09
:Q1
09
:Q2
09
:Q3
09
:Q4
10
:Q1
10
:Q2
10
:Q3
10
:Q4
11
:Q1
11
:Q2
11
:Q3
11
:Q4
12
:Q1
12
:Q2
12
:Q3
12
:Q4
13
:Q1
13
:Q2
13
:Q3
13
:Q4
14
:Q1
14
:Q2
14
:Q3
14
:Q4
15
:Q1
15
:Q2
15
:Q3
15
:Q4
16
:Q1
16
:Q2
16
:Q3
16
:Q4
Rising unemployment eroded payrolls
and WC’s exposure base.
Unemployment peaked at 10% in late 2009.
* = actual; = forecastsSources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (4/15 edition); Insurance Information Institute.
2007:Q1 to 2016:Q4F*
Unemployment forecasts have been revised modestly
downwards. Optimistic scenarios put the
unemployment as low as 5.0% by Q4 of 2015.
Jobless figures have been revised
downwards for 2015/16
23
15
21
70
52
12
65
73
-71
32 6
4 81
55
3-1
15
-10
6-2
21
-21
5-2
06
-26
1-2
58
-42
2-4
86
-77
6 -69
3-8
21
-69
8-8
10
-80
1-2
94
-42
6-2
72
-23
2 -14
1-2
71
-15
-23
22
0-3
81
92
94 11
01
20
11
71
07
19
91
49
94
72
22
32
31 3
20
16
61
86 21
91
25
26
81
77
19
12
22
36
42
28
24
61
02
13
17
51
72
13
61
59
25
52
11
21
52
19 26
31
64
18
82
22
20
11
70
18
01
53
24
72
72
86
18
31
75 22
33
13
23
8 27
22
43
20
92
35
21
84
14
31
92
02 2
64
12
9
11
3
(1,000)
(800)
(600)
(400)
(200)
0
200
400
600
Jan-
07F
eb-0
7M
ar-0
7A
pr-0
7M
ay-0
7Ju
n-07
Jul-0
7A
ug-0
7S
ep-0
7O
ct-0
7N
ov-0
7D
ec-0
7Ja
n-08
Feb
-08
Mar
-08
Apr
-08
May
-08
Jun-
08Ju
l-08
Aug
-08
Sep
-08
Oct
-08
Nov
-08
Dec
-08
Jan-
09F
eb-0
9M
ar-0
9A
pr-0
9M
ay-0
9Ju
n-09
Jul-0
9A
ug-0
9S
ep-0
9O
ct-0
9N
ov-0
9D
ec-0
9Ja
n-10
Feb
-10
Mar
-10
Apr
-10
May
-10
Jun-
10Ju
l-10
Aug
-10
Sep
-10
Oct
-10
Nov
-10
Dec
-10
Jan-
11F
eb-1
1M
ar-1
1A
pr-1
1M
ay-1
1Ju
n-11
Jul-1
1A
ug-1
1S
ep-1
1O
ct-1
1N
ov-1
1D
ec-1
1Ja
n-12
Feb
-12
Mar
-12
Apr
-12
May
-12
Jun-
12Ju
l-12
Aug
-12
Sep
-12
Oct
-12
Nov
-12
Dec
-12
Jan-
13F
eb-1
3M
ar-1
3A
pr-1
3M
ay-1
3Ju
n-13
Jul-1
3A
ug-1
3S
ep-1
3O
ct-1
3N
ov-1
3D
ec-1
3Ja
n-14
Feb
-14
Mar
-14
Apr
-14
May
-14
Jun-
14Ju
l-14
Aug
-14
Sep
-14
Oct
-14
Nov
-14
Dec
-14
Jan-
15F
eb-1
5M
ar-1
5
Monthly Change in Private Employment
January 2007 through Mar. 2015 (Thousands, Seasonally Adj.)
Private Employers Added 11.20 million Jobs Since Jan. 2010 After Having Shed 5.01 Million Jobs in 2009 and 3.76 Million in 2008 (State and Local Governments Have Shed Hundreds of Thousands of Jobs)
Source: US Bureau of Labor Statistics: http://www.bls.gov/ces/home.htm; Insurance Information Institute
Monthly losses in Dec. 08–Mar. 09
were the largest in the
post-WW II period
129,000 private sector jobs were
created in March. In March 2014, the last of the private jobs lost in the Great Recession were
recovered
163
Jobs Created2014: 2.722 Mill2013: 2.368 Mill2012: 2.294 Mill2011: 2.400 Mill2010: 1.277 Mill
2,722,000 jobs were created
in 2014
164
Nonfarm Payroll (Wages and Salaries):Quarterly, 2005–2014:Q4
Note: Recession indicated by gray shaded column. Data are seasonally adjusted annual rates.Sources: http://research.stlouisfed.org/fred2/series/WASCUR; National Bureau of Economic Research (recession dates); Insurance Information Institute.
Billions
$5,500
$5,750
$6,000
$6,250
$6,500
$6,750
$7,000
$7,250
$7,500
$7,75005
:Q1
05:Q
205
:Q3
05:Q
406
:Q1
06:Q
206
:Q3
06:Q
407
:Q1
07:Q
207
:Q3
07:Q
408
:Q1
08:Q
208
:Q3
08:Q
409
:Q1
09:Q
209
:Q3
09:Q
410
:Q1
10:Q
210
:Q3
10:Q
411
:Q1
11:Q
211
:Q3
11:Q
412
:Q1
12:Q
212
:Q3
12:Q
413
:Q1
13:Q
213
:Q3
13:Q
414
:Q1
14:Q
214
:Q3
14:Q
4
Prior Peak was 2008:Q3 at $6.54 trillion
Recent trough (2009:Q1) was $6.23 trillion, down
5.3% from prior peak
Growth rates2011:Q3 over 2010:Q3: 4.1%2012:Q3 over 2011:Q3: 3.2%2013:Q3 over 2012:Q3: 3.6%2014:Q4 over 2013:Q4: 5.1%
164
Latest (2014:Q4) was $7.57 trillion, a new peak--$1.34 trillion above 2009 trough
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$25
$30
$35
$40
$45
$50Wage & Salary DisbursementsWC NPW
165
Payroll Base* WC NWP
Payroll vs. Workers Comp Net Written Premiums, 1990-2014P
*Private employment; Shaded areas indicate recessions. WC premiums for 2014 are I.I.I. estimates..Sources: NBER (recessions); Federal Reserve Bank of St. Louis at http://research.stlouisfed.org/fred2/series/WASCUR ; NCCI; I.I.I.
Continued Payroll Growth and Rate Gains Suggest WC NWP Will Grow Again in 2015
7/90-3/91 3/01-11/0112/07-6/09
$Billions $Billions
WC premium volume dropped two years before
the recession began
WC net premiums written were down $14B or 29.3% to
$33.8B in 2010 after peaking at $47.8B
in 2005
Workers Compensation Operating Environment
170
Workers Comp Results Have Improved Substantially in Recent Years
170
Workers Compensation Premium: Third Consecutive Year of IncreaseNet Written Premium
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 130
10
20
30
40
50
31.0 31.3 29.8 30.5 29.126.3 25.2 24.2 23.3 22.3
25.0 26.129.2 31.1
34.737.8 38.6 37.6
33.830.3 29.9
32.335.1 37.0
35.3 35.734.3 35.4
33.6
30.128.5
26.9 25.9 25.0
28.6
32.1
37.7
42.3
46.547.8
46.544.3
39.3
34.6 33.836.4
39.641.9
State Funds ($ B)
Private Carriers ($ B)
Pvt. Carrier NWP growth was +5.4% in 2013 and
8.7% in 2012
$ Billions
Calendar Yearp Preliminary
Source: 1990–2013p Private Carriers, Annual Statement Data, NCCI.1996–2013p State Funds: AZ, CA, CO, HI, ID, KY, LA, MD, MO, MT, NM, OK, OR, RI, TX, UT Annual Statements
State Funds available for 1996 and subsequent
U.S. Health Care Expenditures,1965–2022F
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$42.
0$4
6.3
$51.
8$5
8.8
$66.
2$7
4.9
$83.
2$9
3.1
$103
.4$1
17.2
$133
.6$1
53.0
$174
.0$1
95.5
$221
.7$2
55.8
$296
.7$3
34.7
$369
.0$4
06.5
$444
.6$4
76.9
$519
.1$5
81.7
$647
.5$7
24.3
$791
.5$8
57.9
$921
.5$9
72.7
$1,0
27.4
$1,0
81.8
$1,1
42.6
$1,2
08.9
$1,2
86.5
$1,3
77.2
$1,4
93.3
$1,6
38.0
$1,7
75.4
$1,9
01.6
$2,0
30.5
$2,1
63.3
$2,2
98.3
$2,4
06.6
$2,5
01.2
$2,6
00.0
$2,7
00.7
$2,8
06.6
$2,9
14.7
$3,0
93.2
$3,2
73.4
$3,4
58.3
$3,6
60.4
$3,8
89.1
$4,1
42.4
$4,4
16.2
$4,7
02.0
$5,0
08.8
U.S. health care expenditures have been on a relentless climb for most of the past half century, far outstripping population growth,
inflation of GDP growth
178
From 1965 through 2013, US health care expenditures had
increased by 69 fold. Population growth over the same period increased by a factor of just 1.6. By 2022, health spending will have
increased 119 fold.
$ Billions
Sources: Centers for Medicare & Medicaid Services, Office of the Actuary at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html accessed 3/14/14; Insurance Information Institute.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22
National Health Care Expenditures as a Share of GDP, 1965 – 2022F*
Sources: Centers for Medicare & Medicaid Services, Office of the Actuary at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html accessed 3/14/14; Insurance Information Institute.
1965 5.8%
Health care expenditures as a share of GDP rose from 5.8% in 1965 to 18.0% in 2013 and are expected to
reach 19.9% of GDP by 2022
% of GDP
2022 19.9%
1980: 9.2%
1990: 12.5%
2000: 13.8%
2010: 17.9%
Since 2009, heath expenditures as a %
of GDP have flattened out at about 18%--the
question is why and will it last?
CYBER RISK & CYBER INSURANCE
187
Cyber Risk is a Rapidly Emerging Exposure for Businesses Large and
Small in Every IndustryRapidly Increasing Interest from
Businesses, Media & Public Policymakers187
Data Breaches 2005-2014, by Number of Breaches and Records Exposed# Data Breaches/Millions of Records Exposed
* 2014 figures as of Jan. 12, 2014 from the ITRC.Source: Identity Theft Resource Center.
157
321
446
656
498
419447
619
783
662
85.687.9
17.322.9
35.7
19.1
66.9
222.5
16.2
127.7
100
200
300
400
500
600
700
800
2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
20
40
60
80
100
120
140
160
180
200
220
# Data Breaches # Records Exposed (Millions)
The Total Number of Data Breaches Rose 28% While the Number of Records Exposed Was Relatively Flat (-2.6%)
Millions
188
Data/Privacy Breach:Many Potential Costs Can Be Insured
Source: Zurich Insurance; Insurance Information Institute
Forensic costs to discover
cause
190
Source: Insurance Information Institute research.
The Three Basic Elements of Cyber Coverage: Prevention, Transfer, Response
Loss Prevention
Post-Breach Response(Insurable)
Loss Transfer (Insurance)
Cyber risk management today involves three essential components, each designed
to reduce, mitigate or avoid loss. An increasing number of cyber risk products
offered by insurers today provide all three.
191
194
DISTRIBUTION TRENDS
Distribution by Channel Type Continues to Evolve Rapidly
196
Commercial P/C Distribution Channels, Direct vs. Independent Agents
Source: Insurance Information Institute; based on data from Conning and A.M. Best.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
72 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Direct Independent Agents
Independent agents have seen only modest erosion in commercial lines market share in
recent decades
197
Personal Lines Distribution Channels, Direct vs. Independent Agents
Source: Insurance Information Institute; based on data from Conning and A.M. Best.
0%
10%
20%
30%
40%
50%
60%
70%
80%
72 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Direct Independent Agents
Independent agents have lost personal lines market share since the early 1970s. Although the
trend has slowed, it may be accelerating again.
200
Growth Rates: Major PPA Direct Writers vs. All Private Passenger Auto Writers
8.3%8.2%
3.7%
0.5% 0.5% 0.0%
-0.3% 0.0%
1.5% 1.4%3.3% 4.0%
7.54%
16.62%18.42%
13.29% 12.88%
10.61%
5.17% 4.89% 5.64% 5.00%6.90%
8.72% 9.15%
-1%
4%
9%
14%
19%
24%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
PPA Growth Direct Writer Growth
Direct Writers Have Grown Faster Than The Private Passenger Market Since 2002
(% Growth Vs. Prior Year)Growth Has Picked Up
With the Economic Recovery.
*Includes GEICO, Progressive Direct, Esurance and 21st Century.Sources: SNL Financial; Insurance Information Institute.
206
The Rise of the Smart Phone: Technology is Available for All Distribution Channels
Note: Share of positive responses to the question: “Have you used your mobile device in the past two years to deal online with an insurer?”
Source: Swiss Re from “2013 Consumer-Driven Innovation Survey.” Accenture (2013)
Use of smart mobile devices in insurance distribution
% Positive Responses to the Question: Have you used your mobile device in the past two years to deal online
with an insurer?
Smart phones are a technology
available to all distribution
channels
: Should Insurers Be Concerned?
207
Google Compare launched in California on March 5 and sent ripples through PPA
market
209
DISTRIBUTION DEMOGRAPHICS
Employment Among Agents and Brokers Has Recovered but Consolidation Trends Will
Persist
209
210
U.S. Employment in Insurance Agencies & Brokerages: 1990–2015*
Thousands
500
525
550
575
600
625
650
675
700
725
750
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
*As of January 2015; not seasonally adjusted. Includes all types of insurance.Note: Recessions indicated by gray shaded columns.Sources: U.S. Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institute.
188 189 182
224 216
264279
297
184204
289
321
267
314
177
10
60
110
160
210
260
310
360
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14:6M
Agent/Broker M&A Deals, 2000-2014:6M
Source: Optis Partners, “Agent-Broker Merger & Acquisition Statistics: The New Normal?”, August 2014; Insurance Information Institute.
Number of Deals
Agent/Broker activity is running at a record pace in 2014 with 314
deals announced through June 30.
The rapidly changing distribution environment is one factor driving IA
consolidation
215
Usage-Based Insurance (UBI): Telematics
215
UBI Is Catching On Among Insurers and Consumers, But Is
It a Transient Technology?
218
Autonomous/Driverless Vehicles
218
Rapid Technological Innovations in Motor Vehicle Engineering Are
Likely to Transform Auto Insurance and Product Liability Markets
220
Projected Sales of Partially and Fully Autonomous Vehicles through 2035
By 2035, it is estimated that 25% of new vehicle sales
could be fully autonomous models
Source: Boston Consulting Group.
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238