How Population Shifts Are Changing Personal Lines Insurance

There are “far-reaching implications” for personal lines insurers and the products and services they provide as the U.S. continues to undergo changes in its demographic structure, an industry report states.

The third annual overview of personal lines insurance consumer markets by Conning Inc. offers insurers and distributors a look at changing trends, activities and growth opportunities in the market.

The study offers trends with positive implications, and those that may have a negative impact on selling or distributing personal lines.

If one underlying theme can be found in the report, it’s the portrait of an evolving consumer base.

“Evolving slowly, current trends over time will yield a population and consumer base vastly different from what currently exists,” the report states.

Alan Dobbins, director of insurance research at Conning, says the changes are going to happen quickly.

“Things are going to be different in, say, 15 years than our experience has been in the prior 30 years or so,” Dobbins said.

The report examines four major drivers of demographic changes: population growth; population aging; a shift in the geographic distribution of the population; and ethnic/racial diversity.

Changes in the consumer base are also being driven by technological, economic and cultural forces, as well as changing behavior patterns of the U.S. consumer, according to the report.

Population Slow Growth

U.S. Census projections show slightly slower growth than previously believed from 2015 to 2050. Prior projections in 2012 showed the U.S. population reaching 399.8 million by 2050, but a revised figure shows 1.5 million people less than originally projected.

“Premium growth is closely linked to population changes, with growth a fundamental determinant of exposure unit growth and an important variable in insured values and in premium pricing as well,” the report states.

To put it in perspective, population growth is now the slowest since the Great Depression, and in the coming decade it will be even slower.

This trend could be compounded by a long-term consolidation trend in the market, which may “apply added competitive pricing pressure to industry pricing,” the report states.

The effect has been a drag on the growth in both auto and homeowners insurance, according to the report.

Aging Population

Within the U.S. population trend, the report highlights the impact rapid aging will have on the population and the industry. The 65-plus age group is expected to reach 22 percent of the population by 2050, according to the report.

An upside is this trend may create opportunities for those who specialize in products and services that cater to the elderly.

From 2003 to 2013, the number of licensed drivers aged 65 or older umped by 8.2 million, a 29 percent increase, according to U.S. Census data.

Yet, this rapid growth in the older age segment combined with slow growth in the 35-to-54 age group will dampen auto demand over the next 20 years, the report states.

A healthier and more active older population thanks to advances in medicine may present drawbacks.

“For auto insurers, the 70-plus age group is a growing population of drivers in what is one of the worst age cohorts for claims activity,” the report states.

But according to a 2014 study by the Insurance Institute for Highway Safety, today’s drivers aged 70 and older are less likely to be involved in crashes than previous generations, and less likely to be killed or seriously injured if they do crash.

Also, new safety technologies available to senior drivers who can afford them, such as active braking, backup cameras and blind-spot warnings, are becoming standard equipment and could reduce claims.

Homeowners Exposure

Housing demand may also be impacted.

Slow growth of the overall age group of 18 to 64, expected to average 0.3 percent annually over the next 20 years, “will not provide the same strong boost to homeowners exposure units as the period between 1970 and 2000,” the report states.

The total U.S. population may be growing more slowly, but it won’t be growing uniformly, according to the report.

“The clear trend is much stronger growth in the South and the West,” the report states. “The Northeast is barely growing, and the Midwest is only a little better.”

Between 2000 and 2014, the U.S. population grew by an estimated 37 million, and more than 80 percent of that growth came from the Southern and Western states.

This trend has resulted in a lower age profile for those regions, which correlates with higher birth rates and lower mortality rates.

States faring better economically are also experiencing rising fertility rates, such as South Dakota, where unemployment is 3.8 percent and the birth rate is 14.5 — 2.1 points above the national average.


Migration has also accounted for some growth in these regions.

Southern states, particularly Texas and Florida, experienced the largest migration inflows, while the largest outflows tended to be from the East and Midwest. New York lost nearly half-a-million people to migration and Illinois lost more than 300,000, according to the report.

“States gaining in population — due to either natural increase, domestic migration, or international immigration — present stronger growth opportunities for personal lines insurers,” the report states.

Urban growth is outpacing the rest of the U.S., with growth in the nation’s largest cities — those with populations of 50,000 or more — are nearly double the rate elsewhere between 2010 and 2012, according to the report.

“Since the Recession most of the growth has been in the big metro areas,” Dobbins said. “There’s been very little population growth outside of that.”

Insurers are already capitalizing on the opportunities this trend presents, the report states.

For instance, Infinity Insurance has focused on the urban market, and the carrier’s growth in personal auto between 2008 and 2013 was nearly 50 percent versus 10 percent for the total personal auto insurance market, according to the report.

There are downsides to this gentrification for P/C insurers. Urban areas tend to be better served by mass transit, and ridesharing providers like Uber, with few homeowners and a large number of renters — renters insurance presenting a potentially high volume, but low premium opportunity.

Overall, homeownership following the housing crisis fell from 69 percent in 2006 to under 64 percent currently, according to the report.


The portion of the U.S. population experiencing the most growth, and therefore greatest growth opportunities, are minorities. These groups accounted for 87 percent of the national population growth from 2000 to 2010, according to the report.

By current Census projections, the U.S. will be “majority-minority” by 2044.

The Hispanic population is projected to account for more than 50 percent of the total U.S. population growth between 2015 and 2020, while the Asian population is expected to contribute 17 of the total population growth, according to the report.

The Hispanic market offers one of the most notable opportunities for growth. The report estimates a Hispanic personal auto market size of $23 billion, with a small but growing portion of the homeowners market.

The report forecasts the overall Hispanic personal lines market to reach nearly $40 billion by 2020.

The opportunity to capture the Hispanic market has so far not been squandered.

“Allstate, Nationwide, and State Farm all devote significant resources to account acquisition and client servicing in this segment,” the report states. “Insurers are not the only ones positioning to take advantage of this market. Both Protector Holdings and Confie Seguros were formed to consolidate retail brokerages operating in the Hispanic market.”

Distribution, Evolving Market

As the landscape for personal lines changes, so must the way in which the products are distributed.

“Auto is clearly much more affected by developments in the direct response channel, which now has a market share close to 30 percent,” the report states.

Bottom line: there is an increasing level of diversity within the consumer market, with one channel unlikely to meet evolving expectations.

“Leading personal lines insurers are following the examples of retail giants such as Amazon and Walmart and expanding distribution options to broaden scope and enhance the customer experience,” the report states.

Insurers are also experimenting with the potential of mobile, according to the report.

“The critical capability enabled by mobile is real-time contact — contact that is not dictated by physical location but really only by attention span,” the report states.

High Net Worth

One bustling market segment is high-net-worth, and that activity includes mergers and acquisitions as well as new market entries, according to the report, which pegs the segment at $56 billion to $87 billion.

That segment’s needs are now only partially being met by high-net-worth specialists — as much as 70 percent to 80 percent of the potential market is insured outside of these specialists, according to the report.

Chubb (with is being bought by ACE), AIG and PURE are among those with products and services tailored to the needs of the high-net-worth segment. New entrants include Nationwide, and Cincinnati Financial, which recently announced its plan for expanding in the market, the report notes.

This market charges higher premiums to serve a population that wants a high level of services.

Nonstandard auto is another segment with identifiable needs, and a group of specialist insurers that have emerged.

The market represents as much as $36 billion to $44 billion in annual premium and a declining presence by some of the largest personal auto competitors, the report states.