Challenging economies and market conditions will continue to plague commercial insurers. Facing a decrease in premiums and higher combined ratios, insurers have turned mainly to cost cutting measures in an attempt to remain profitable.

Between 2007-2011, insurers experienced a 13% decrease in net written premiums. While the economy seems to be slowly improving, this also means slow growth in commercial line premiums. Over the next 5 years, premiums are expected to grow by only 1-4%.

Challenging times continue for commercial insurers - US Commercial Insurance Industry Net Written Premiums 2007-2011
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Unfortunately, most insurers have not been able to rely on investments for growth due to historically low interest rates. The impact has been so dramatic that insurers may no longer be able to rely on their investments as a dependable inflow of cash.

The impact of these decreases has been amplified by a 300% increase in catastrophic losses from 2008-2011. Catastrophes such as hurricanes Irene and Sandy, combined with other losses such as the 2011 tornado season, have driven losses much higher than ever predicted.

It’s no surprise that insurers, experiencing a dramatic increase in their loss ratios, have had almost a singular focus on driving down costs. From implementing systems improvement programs to investing in more efficient back-end technology, insurers have made some substantial improvements. However, as our recent study on high performers shows, insurers would benefit from a more balanced approach that takes all aspects of operations into account.

Challenging times continue for commercial insurers - Expense Ratio Trends for the US Commercial Insurance Industry
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Join me over the next few weeks as I take a look at the top performers in the commercial insurance industry. Based on a recent viewpoint developed by my colleague Anudeep Chauhan, I’ll explore what makes these industry leaders successful and imperatives for the industry leaders of the future.

To learn more, download: Chasing the Alpha: How Commercial Lines Insurance Leaders Outperform the Market

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