The recession has hit property and casualty (P-C) insurers hard, according to a new study by Conning Research & Consulting, with a substantial loss in available business in the small business sector. The study, released Monday, revealed that since 2007, the sector, made up of companies with fewer than 50 employees, has shrunk substantially, taking a toll on the companies that insure it.
The study, titled "The Property-Casualty Small Business Market: Larger Insurers Take Share in a Contracting Sector," said that the small business sector suffered from two main factors: lack of available capital and its ties to the contracting industry. The continuation of hard times in the small business sector continuing through 2010 has led to changes within the P-C industry itself. Not only has the decrease in the small business sector hit insurers, but the effects have also caused a "dramatic market shift" among small, medium and large insurers.
Conning analyst Clint Harris said in a statement that there are two major shifts within the industry that have been identified by the study. "First, there has been a much deeper premium decrease for small business accounts, which we now estimate at $71 billion, or a 17% decline from 2007 levels—versus an 8% decline for middle and large market. Second, we see an important shift in market share in this sector from smaller insurers with less than $500 million in premium to mid-sized and large insurers."
Stephan Christiansen, director of research at Conning, said in a statement, "Despite the shift of market share from small to larger insurers, not all small insurers are losing share, and not all larger insurers are gaining."
He went on to say that the insurers increasing market share have been "active in the market, acquiring business, increasing products and services, and expanding their distribution footprints. Even if the small business sector experiences rapid growth for the next few years, we believe that the shift in market share will continue."
He added, "The market today favors broad, technically supported and well-managed distribution strategies, along with robust product development that addresses the evolving needs of small businesses."
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