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West Virginia Property & Casualty Insurance Market Review

Detailed overview of the property and casualty insurance market in West Virginia, covering market size, trends, premium growth, economic impacts, and distribution channels.

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West Virginia Property & Casualty Insurance Market Review

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  1. Property/Casualty Insurance in West Virginia: Review & Preview Presentation to the Professional Independent Insurance Agents of West Virginia Charleston Marriot Charleston, WV September 14, 1999 Robert P. Hartwig, Ph.D., Vice President & Chief Economist Insurance Information Institute 110 William Street New York, NY 10038 Tel: (212) 669-9200Fax: (212) 732-1916 bobh@iii.org  www.iii.org Download this presentation at: http://www.iii.org/media/piaawv/index.html

  2. SCALE AND SCOPE OF THE WEST VIRGINIA P/C MARKETPLACEMarket and Economic OverviewAutoHomeCommercial

  3. United StatesInsurance Market Place 1998 Direct Premiums Written Source: Insurance Information Institute, A.M. Best

  4. States with Largest Number of P/C Insurance Domiciles vs. WV Source: NAIC, Insurance Information Institute

  5. Growth in Direct Written Premiums: WV and US * Source: A.M. Best, Insurance Information Institute; *III Estimate

  6. Direct Loss Ratio Trends, Selected Lines in WV Source: NAIC, Insurance Information Institute

  7. Return on Net Worth,Selected Lines in W. Virginia Source: NAIC, Insurance Information Institute

  8. Employment Growth:Ahead of the Pack Source: III, BLS, RFA, WV Development Office.

  9. Real Economic Growth:A Bit Behind the Curve Source: III, BLS, RFA

  10. Unemployment:The Silver Lining * * As of July 1999 Source: III, BLS, RFA, WV Development Office.

  11. Growth in Net Premiums Written (by Line) 1998 Source: A.M. Best, Insurance Information Institute.

  12. Net Investment Income 1997 Peak = $41.5B 1998 = $39.9B 1999 (Estimate) = $38B 2000 (Forecast) = $37B

  13. Premiums-to-Surplus Ratio 1998-2000 (Est./Forecast) = 0.8

  14. P/C Industry Combined Ratio 1998 = 105.6 1999 (Estimate) = 106.8 2000 (Forecast) = 108

  15. U.S. InsuredCatastrophe Losses Source: Property Claims Service, Insurance Information Institute

  16. 1999 Stock Market Performance, by Segment Year to Date through 08/27/99 Source: SNL Securities, Insurance Information Institute

  17. AUTO INSURANCE

  18. Direct Written Premium Growth:PP Auto Source: A.M. Best, Insurance Information Institute

  19. * III estimates. Source: NAIC, Insurance Information Institute Average Expenditures on Auto Insurance

  20. Attorney Involvement by Type of Claim (1997) Overall: 19921997 US 46% 41% WV 31% 21% Bodily Injury Source: Insurance Research Council

  21. Claims $75 Pmts. to Inj. Persons$33 Medical 8 Wage loss/Other econ. 2 Pain/suffering/non-econ. 7 Lawyer fees 13 Other settlement costs 3 Pmts for Damage to Cars $42 Prop. Damage Liab. 15 Collision & Comp. 24 Other 3 Expenses $25 Comm./Selling exp. $16 General exp. 5 State prem tax/lic./fees 2 Policyholder dividends 2 Claim/Expense Subtotal $100 Bottom Line Investment Gain $11 PT Inc. (100-100+11) 11 Federal Taxes 4 After-Tax Profit $7 Where the U.S. Auto Premium Dollar Goes, 1997(per $100 written premium) Sources: Insurance Information Institute based on data from ISO, IRC and NAIC

  22. July 1, 1999 The Meanest Streets “3 Dallas-area Intersections Among Most Dangerous in U.S.” By Tony Hartzel and Curtis Howell --The Dallas Morning News • Belt Line & Midway in Addison: 263 crashes in 1998 • Park & Preston in Plano: 249 accidents in 1998 • Belt Line & Preston in Dallas: 241 accidents in 1998 State Farm will contribute $120,000 toward improvements at each intersection http://www.dallasnews.com/metro/0701met1000intersect.htm

  23. HOMEOWNERS INSURANCE

  24. Direct Written Premium Growth:Homeowners Source: A.M. Best, Insurance Information Institute

  25. States with Highest Homeowners Insurance Expenditures vs. US & WV Wisconsin had the lowest expenditures: $237 Source: NAIC (May 1999 release), Insurance Information Institute

  26. COMMERCIAL LINES

  27. Direct Written Premium Growth:Commercial Multi Peril Source: A.M. Best, Insurance Information Institute

  28. Direct Written Premium Growth:Workers’ Compensation Privatization of WV’s workers’ comp market could add $150 million to P/C premium base. Nevada’s privatization put $372 million up for grabs as of July 1, 1999. Source: A.M. Best, Insurance Information Institute

  29. MERGER & ACQUISTION ACTIVITY: INDUSTRY IMPACTS

  30. Insurance Mergers and Acquisitions 1998: 565 deals valued at $165.4 B Source: Compiled from Conning & Company reports.

  31. M&As by Segment/#Deals 1998 = 565 Deals Source: Conning & Co.

  32. M&As by Segment/Value 1998 = $165.4 Billion Source: Conning & Co.

  33. DISTRIBUTION

  34. P/C Premium Distribution1998 Personal Lines ($146B) Ind. Agents/ Brokers 27% Banks 2.8% ($4.1B) $39.5B Direct Response 9.8% Internet 0.9% ($1.3B) $14.3 Other 3.0% ($4.4B) $82.6B Captive Agents 56.5% Source: Insurance Information Institute, A.M. Best, Datamonitor

  35. P/C Premium Distribution1998 Commercial Lines ($135B) Ind. Agents/ Brokers73% $99B $36B CaptiveAgents27% Direct Response 0.3%($0.4B) Source: Insurance Information Institute, A.M. Best

  36. Distribution Methods ofTop 10 U.S. Market Leaders Source: A.M. Best, Insurance Information Institute.

  37. Shifting Distribution Channels: Property/Casualty Insurers 1998 2003 Source: Datamonitor

  38. Shifting Distribution Channels: Life/Health Insurers 1998 2003 Source: Datamonitor

  39. Respondents Extremely/Very Comfortable Purchasing Auto Insurance(%), by Outlet Source: Insurance Information Institute’s 1999 Insurance Pulse

  40. Persons Not Very/Not At All Comfortable Purchasing Auto Insurance(%), by Outlet Source: Insurance Information Institute’s 1999 Insurance Pulse

  41. Respondents Having Better Relationship with Agents, Banks, or Neither Source: Insurance Information Institute’s 1999 Insurance Pulse

  42. Direct Channels Channel Outputs Traditional Channels Brand Awareness Direct Mail Leads Information Internet Agents Sales Tele-insurance Cross-Sell generates effectively Source: Datamonitor Changing Channels

  43. Agents Agents Direct Channels Direct Channels Projections if current conditions stay same for next five years. Projections for next five years if large-scale technological innovations are put in place. Source: Datamonitor 1999 Distribution Survey. Super-Channel

  44. Distribution Channels Continue to Proliferate Agent Broker Mail Telephone Bank Customer Insurer Internet Dealerships Payroll Plans ???

  45. The Electrons Are Coming... www.InsureMe.com www.NoAgent.com

  46. E-Agencies (As of Jan. 1999) Just 3% (1,200) of the 42,000 independent agencies in the US have a web site

  47. EMERGING ISSUES • Y2K • Financial Services Reform • Banks and Insurance • Firearms Exposure? • Fraud

  48. Insurers’ Estimated Y2KExposure: Worst Case Scenario* *High estimate ($35 billion); M&R estimates range from $15 - $35 billion. Source: Milliman & Robertson

  49. Senate Banks, securities firms & insurers must operate as holding cos. Fed oversight Bar banks from entering commercial businesses/bar non-fin. cos. from thrifts Small, rural banks exempt from CRA Criminalize privacy breaches House Holding cos/national bank subsidiary structures permitted Fed/OCC oversight Banks can enter commercial services/non-fin. cos can own thrifts Extend CRA to holding companies Disclosure policies, customer consent Financial Services Reform: Work (Still) in Progress

  50. 1997 Bank Insurance Premiums Total = $27.8 Billion Source: Association of Banks-in-Insurance

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