Fact or Fiction? Insurance Tidbits of Known and Little-Known Information

December 20, 2010

Have you ever wondered what big events helped shape regulation of the current U.S. insurance industry? Or if drivers of certain cars have more risk? What about the most attractive insurance job in the industry? These are just a few questions that Insurance Journal editors will answer in this year’s Market Fact Book.

Derived from various industry sources, as well as Insurance Journal’s own database, the 2010 Market Fact Book collects of some of the more interesting (and perhaps not so interesting) insurance facts and figures for your reading pleasure. We hope you enjoy!

Size of U.S. Insurance Market

Twenty-eight of the world’s 50 largest insurance markets are individual states within the United States, according to the National Association of Insurance Commissioners (NAIC). As a whole, the U.S. insurance market surpasses the combined size of the second, third and fourth next largest markets. The insurance market of Connecticut is larger than the markets in Brazil or Sweden. The markets in California, New York and Florida are each larger than the markets in India, Ireland or South Africa.

More than 2,000 insurers have been formed since 1995 Ñ leading to a total of more than 7,661 in the United States, according to NAIC. U.S. insurers have combined premiums of more than $1.6 trillion. States derive $17.5 billion in taxes and fees from insurers, with approximately 8 percent used to support regulation and the remainder supporting state general revenue funds.

Number of Agencies

The total number of independent agencies in the country remains stable at around 37,500 as start-ups have kept pace with agency mergers and closings, according to he 2010 Agency Universe Study by Future One, a collaboration of the Independent Insurance Agents & Brokers of America and independent agency companies. There are today as many agencies as there were in 2006.

Approximately 11 percent or 4,000 of today’s independent agencies were founded in 2008, 2009 or 2010.

P/C Insurers

In 2009, 2,737 property/casualty insurance companies operating in the United States represented net premiums written of $423 billion, according to the Insurance Information Institute’s Insurance Fact Book 2010. Those P/C carriers sold primarily auto, home and commercial insurance. Total cash and invested assets of P/C insurers 2009 totaled $1.3 trillion in 2009.

What Cars Say About Their Drivers

Does what people drive affect how they drive? According to Quality Planning (QPC), the answer is yes.

QPC found that people who drive so-called “spirited vehicles” including Mercedes-Benz, other foreign-made cars and Hummers tend to have more traffic violations than those driving so-called “cautious vehicles,” a category that includes SUVs, Hyundais and several U.S. models.

Drivers of the Mercedes-Benz SL-Class roadster topped the list of top violators, with four times the number of violations compared with the average. The Scion, which Toyota designed expressly for Gen Y-ers, had not one but two entries in the top 10. The big Hummers and the Pontiac Grand Prix rounded out this category.

SUVs and hatchbacks showed lower violations on average than traditional two- and four-door vehicles.

Among those vehicles that QPC classified as “cautious vehicles,” eight of the top 10 were either an SUV or minivan, suggesting that carrying passengers, and possibly younger passengers in car seats, makes a noticeable difference in how people drive. Sixty percent of SUV drivers in this category were women, whereas for minivans, 51 percent of these drivers were women.

‘Spirited Vehicles’ (vehicles with highest percentage of violations)

Make Model Body Style Violations* Average Age % Male Mercedes-Benz SL-Class Convertible 404% 53 41% Toyota Camry-Solara Coupe 349% 50 39% Scion TC Coupe 343% 30 39% Hummer H2/H3 SUV 270% 37 40% Mercedes-Benz CLS-63 AM Sedan 264% 46 58% Acura Integra Coupe 185% 33 60% Pontiac Grand Prix Sedan 182% 40 41% Mercedes-Benz CLK 63 AM Sedan 179% 47 44% Volkswagen GTI Hatchback 178% 40 44%
Violations/100,000 miles driven, expressed as percentage of average. Source: www.qualityplanning.com

‘Cautious Vehicles’ (vehicles with lowest percentage of violations)

Make Model Body Style Violations* Average Age % Male Buick Rainier SUV 23% 61 71% Mazda Tribute SUV 26% 36 29% Chevrolet C/K- 3500/2500 Pickup 26% 40 86% Kia Spectra Sedan 27% 40 44% Buick Lacrosse SUV 32% 65 50% Saturn Aura Hybri Sedan 37% 59 14% Oldsmobile Silhouette Minivan 37% 41 50% Chevrolet Uplander Minivan 38% 40 54% Hyundai Tucson SUV 38% 47 40% Pontiac Vibe SUV 39% 41 32%
Violations/100,000 miles driven, expressed as percentage of average. Source: www.qualityplanning.com.

Best Jobs

The job search site, CareerCast, ranked actuary as the No. 1 best job out of 200. The ranking was based on a formula that weighed physical demands, work environment, income, stress and hiring outlook. Actuaries beat out software engineers, biologists, historians and meteorologists. A job as an actuary ranked very high in work environment and low in physical demands and stress. The salary range of $49,000 to start up to $161,000 for top earners also boosted its ranking. Other insurance jobs also made the list as. Insurance underwriter came in at number 39 and insurance agent at 103.

Ungainfully Employed

Employment on the carrier side property/casualty industry saw some of its biggest declines in a generation this year. From the beginning of the recession in 2007 to October 2010, the direct P/C industry saw employment shrink by 29,600, according to an analysis by the Insurance Information Institute. The 461,500 employed by P/C insurers were the smallest amount in 20 years. Employment in agencies and brokerages Ñ which stood at 631,400 in October Ñ has seen employment shrink by 7.1 percent, or 48,200 jobs since the beginning of the recession in December 2007. Declines in agency employment mirrored the rest of the economy Ñ which saw employment fall by 7.2 percent Ñ over the last three years.

Heavy Equipment Theft

In 2009, there were 13,452 heavy equipment thefts reported to the National Crime Information Center. In descending order, the five states with the most incidents of heavy-equipment theft were Texas, Florida, North Carolina, Georgia, and South Carolina. Together, those five states accounted for 43 percent of total equipment theft. Rounding out the top 10 were Tennessee, California, Oklahoma, Missouri, and Ohio. The top 10 states accounted for 62 percent of all thefts.

U.S. Insurance History

In 1752, Benjamin Franklin and his fellow firefighters founded The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire, the nation’s oldest property insurance company. The company formed as a mutual insurance company in which policyholders came together to share the risks. It was modeled after the Amicable Contributionship of London. The company refused to write houses that its members thought were fire hazards and its underwriting standards became the basis for building codes.

4 Important Events

What are the four most important events in the history of state insurance regulation? The first is the 1869 case of Paul v. Virginia in which the U.S. Supreme Court held that insurance was not interstate commerce and not subject to regulation by the federal government under the commerce clause of the Constitution. The second was the reversal of the Paul v. Virginia decision, the South-Eastern Underwriters case, which led to the third important event in 1945 when Congress passed the McCarran-Ferguson Act assuring insurers a limited exemption from antitrust laws to the extent insurance is regulated by states. The fourth is also an act of Congress: the 1999 Gramm Leach-Bliley Act.

Dog Bite Claims

Dog bite claims cost the insurance industry $412 million in 2009, an increase of 6.4 percent from 2008. Dog bites account for more than one-third of all homeowners insurance liability claims paid out in 2009, according to the Insurance Information Institute. The average cost of dog bite claims was $24,840 in 2009, up slightly from $24,461 in 2008. Over the six-year period since 2003, the cost of these claims has risen nearly 30 percent.

Iran Goes on the Black List

While Wikileaks reported that U.S. diplomats were urging re/insurers not to write business with Iran, it wasn’t news to Insurance Journal readers. Germany’s Allianz and Munich Re announced that they would “wind down” business in Iran in February. In July Lloyd’s confirmed that it would “honor the sanctions” and would not insure or reinsure oil shipments in or out of the country.

World Cup Insurance

It started out with 32 teams, took a month to play all the games, and in the end Spain won. Overall insurance coverage for the event totaled $8.95 billion. The quadrennial football (soccer) World Cup, held in South Africa this year, is second only to the Olympic Games in the number of people who attend or watch the events. The games were insured by a number of companies, including Munich Re, Swiss Re, Hannover Re, Allianz, and Lloyd’s. The coverage figures were roughly: property – $4.33 billion; contingency – $4.33 billion; liability – $288.6 million.

Europe Dominates Reinsurance Market

European companies wrote 55 percent of gross premiums written in the global market for non-life (P/C) reinsurance in 2009, according to A.M. Best Co. The global non-life market share breaks down as follows: Munich Re, 16 percent; Swiss Re, 13 percent; Lloyd’s of London, 10 percent; Berkshire Hathaway (the only U.S. company in the top five), 7 percent; Hannover Re, 6 percent; SCOR, 4 percent; Transatlantic Holdings, 3 percent; Everest Re, 3 percent; Korean Re, 3 percent; PartnerRe, 3 percent; all others 31 percent.

Guaranty Funds

The guaranty fund system, which operates in all 50 states, assures policyholders they will be paid in the event that their carrier cannot pay a legitimate claim. It has been in operation since 1968, according to the National Conference of Insurance Guaranty Funds. In that time there have been about 550 insolvencies of property/casualty insurers, and the fund has paid out about $24 billion. The fund usually pays policy limits or $300,000, whichever is less, and in most states, 100 percent of workers’ comp claims.

Hurricanes 2010

The National Oceanic and Atmospheric Administration reported that a total of 19 named storms formed in the Atlantic Basin between June 1, 2010, and Nov. 30, 2010, tying 2010 with 1887 and 1995 for the third highest record. With 12 of the 19 becoming hurricanes, 2010 tied with 1969 for the second highest number of hurricanes on record. Five of the 12 hurricanes became major Ñ Category 3 or higher Ñ Danielle, Earl, Igor, Julia and Karl. Of those major hurricanes, only Earl affected the U.S. mainland, side-swiping the East Coast in September.

Catastrophe Losses

While losses from hurricanes were negligible in the United States during 2010, insured losses from other insured catastrophes, such as tornadoes, thunderstorms, windstorms and winter storms added up. ISO’s Property Claim Services (PCS) unit estimates that insured catastrophe losses in the first half of 2010 were $7.9 billion, up $0.2 billion compared with the same period in 2009 and $2.0 billion more than the average for first-half losses over the past 10 years, according to the I.I.I. ISO reported that a total of $10.6 billion in property losses related to catastrophes were paid by insurers of 2009, less than half of the $27 billion paid in 2008. There were 28 catastrophes in 2009, down from 37 in 2008.

Flood Insurance

There were 5,613,040 federal flood insurance policies in force as of Sept. 30, 2010, representing more than $3.3 billion in premium, according to the National Flood Insurance Program. The state with the most policies in force is Florida, with 2,119,132 policies. After Florida, the top five states in terms of flood policies in place are: Texas (676,931); Louisiana (485,471); California (274,603); New Jersey (229,890); and South Carolina (202,371).


As of Nov. 26, 2010, 66,013 fires had burned 3.31 million acres across the United States this year, which is the lowest year-to-date acreage burned in the last decade, according to the National Interagency Fire Center. While major wildfires are mostly associated with California, Texas had experienced twice as many wildfires as California by August 2010, the I.I.I. noted. Colorado experienced the most expensive wildfire in the state’s history in September Ñ the Fourmile Canyon fire, according to the Rocky Mountain Insurance Information Association. As of late September insured losses from that fire were estimated at $217 million, around four times higher than 2002’s Hayman Fire which resulted in $46.1 in insured damage when adjusted for inflation in today’s dollars.

Texting Bans

While many states have banned texting while driving, a study released in September by the Highway Loss Data Institute (HLDI) found that such bans don’t necessarily reduce crashes. In fact, the bans are associated with a slight increase in the frequency of insurance claims filed under collision coverage for damage to vehicles in crashes. The finding is based on comparisons of claims in four states before and after texting ban, compared with patterns of claims in nearby states, the HLDI said. The states compared were: California (January 2009); Louisiana (July 2008); Minnesota (August 2008); and Washington (January 2008).

The 20% Rule is Unhealthy

Political controversy aside, federal health care reform is expected to take a big chunk out of agents’ and brokers’ wallets in 2011, as new rules kick in that limit insurers administrative expenses – which includes agents’ commissions – to no more than 20 percent of their spending. Agents’ trade groups have vowed to take the fight over the rule to Congress and the National Association of Insurance Commissioners has formed a special task force to monitor how the new federal rules will affect health insurance agents and brokers.

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