Top 25 Carriers’ Premium Growth Jumps 11.4 Percent Q1 2011 vs Q1 2010
By Douglas A. Powell
P&C insurance companies have faced tough economic decisions over the last few years. Experts and analysts have expressed concern over soft pricing exhibited in the underwriting cycle. To avoid the consequences of inaction, many insurance companies appear to have responded with price increases in the first quarter of 2011. Unfortunately, many consumers do not understand the nature of these price increases and are voicing frustration over what they deem as unnecessary premium hikes.
For the quarter ending March 31, 2011, P&C companies comprising the Top 25 writers of P&C insurance in terms of direct premium growth leveraged their experience and, despite a difficult marketplace, increased their direct premium written approximately 11.4 percent over the quarter ending March 31, 2010, an increase of approximately $2.7 billion in premium. In contrast, the more than 2,500 insurers that comprise the remainder of the industry did not fare as well, as their first quarter to first quarter direct written premium increased a mere 0.2 percent, or $209 million. In total, direct premium written for the industry was up more than $2.9 billion. Details are shown in the chart that accompanies this article.
In an impressive display of growth, financial stability and the leveraging of experience, the Top 25 carriers wrote over 22 percent of the P&C insurance industry’s direct written premium in the first quarter of 2011. Consistent with prior periods, less than 1 percent of the company count wrote over 20 percent of the industry’s direct premium written.
The growth in direct premium written period over period for the first quarter is not a result of price increases due to the recent flurry of disasters. The January through March results were reported well before the catastrophes of April, May and June. Although companies increased their rates prior to these disasters, it should be anticipated that direct written premium will increase period over period for subsequent reporting periods as a result of further price increases relating to the recent catastrophic weather events.
If further price increases associated from these storms reach the consumer, it seems likely that even more consumer scrutiny will occur. All companies are faced with the reality that consumers have a desire for decreasing costs. Companies focused on their financial stability cannot succumb to this pressure. The premium growth exhibited by the Top 25 could be an indicator that the softest part of the cycle is behind us.
If this is correct, the pricing cycle should have reached its bottom and firmer prices should assist all participants in the P&C insurance industry report period-to-period premium growth. Joseph Petrelli, president of Demotech, states, “Until a hard market is the reality, I expect the Top 25 to lead the industry in premium growth on both percentage and actual dollars bases. The rest of the industry may follow suit and begin to exhibit growth on a more consistent basis as well.”