Future predictions

People ring in the New Year with all sorts of traditions. New Yorkers drop a Waterford crystal ball in Times Square. Japanese families shoot off fireworks to keep evil spirits away. And in the South, a meal of cornbread black-eyed peas, greens and pork ribs are supposedly guaranteed to bring health and wealth in the future.

But in looking forward to what the new year will bring, it’s sometimes helpful to look back. So here’s a run-down of what’s likely to be in store for the insurance industry in 2007, using 2006 as a crystal ball.

Competition heats up. The property/casualty market is softening, meaning agents and brokers will have to work harder for fewer dollars. Much of this can be attributed to new laws.

Colorado’s switch to a tort auto insurance system from no-fault, for example, has brought new carriers to the market, which subsequently has had the effect of lowering premiums.

California, too, is seeing more carrier competition in the auto and workers’ compensation arenas. When the Golden State’s Commissioner John Garamendi revamped insurers’ auto rating factor law, USAA and Auto Club of Southern California filed class plan rate reductions. Insurers generally balked at having to make the filings, but shortly thereafter, insurers like AAA of Northern California, Chubb, GEICO, Progressive, Infinity and State Farm announced they would be lowering rates, as well.

With regard to workers’ compensation, legislative reforms continue to decrease California State Compensation Insurance Fund’s market share while allowing others to enter the market and decreasing premiums.

Credit scoring conflicts. Voters agreed to allow the use of credit scores in Oregon in 2006, but disputes about the use of scores in determining premiums and about notification of consumers are ongoing. At year’s end 13 state insurance departments, including California, Montana, New Mexico, Utah and Washington joined in supporting a brief filed in connection with a Supreme Court case evaluating the practice. Once the high court rules, the decision will set a precedent for states to follow.

Industry more difficult, not easier. Generally speaking, insurers are facing more pressures. Costs of doing business generally increase with inflation. It’s difficult to attract people to the industry. And, the public is increasingly skeptical about the ethics of the industry, with investigations and settlements regarding broker disclosure and compensation. “How can we deal with insurance costs when faced with the reality that the cost of our own business must go down every year in every way?” asked The Hartford’s Dave Zwiener in 2006.

While these predictions might have you seeing doom and gloom in 2007, don’t give up all hope yet. New lines of business like green building and renewable energy are creating new insurance needs. And, while growth can be unpredictable, businesses and consumers still need to hedge their risks. In other words, insurance — and your jobs — are indispensible.

My advice to surviving 2007 and beyond?

Don’t dwell too much on the past and change with the times. Do that, and my crystal ball says you’ll prosper long into the future.

Topics California Trends