Recession keeping insurance firms busy - The Business Review (Albany):

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The industry has been scrambling to maintain itself amid the recessiojn as giants such as American InternationalkGroup Inc. rely on federal bailouts, consolidation activity slows andprofits decline, particularlu in property and casualty. Prospective customers are being more selective about premiums and loweringprofit margins, industry observers said. In addition to lower-pricedc plans, insurance carriers are losing business customerzs tobankruptcy filings. And the life insurancr industry, which depends so much on is in a especially vulnerabls position until the economy and stocklmarkets rebound, experts said. The U.S. property and casualty insurance industrygenerated $4.
1 billio n in net income during the firstr nine months of 2008 compared with $49.6 billion durinb the same period in 2007, accordinb to a report by Marsh Merceer and Kroll. Agencies are offsetting the decline by freezing spendint levels andnonessential travel, financiak services research firm Celent reported. property and casualty insurancde carriers are chugging through this recession the same as they havethrougjh others, said David VanDelinder, executive director of the Independeng Insurance Agents of Texas. [the industry] is reasonably positive goinf forward,” he said. “It’s such a conservative industr it doesn’t go up and down as much with the economy.
Peopled got to have insurance.” But they’re more discerning and less trusting now. The change, prompted by the AIG (NYSE: AIG) collapse beforde it was taken over by the federal is in stark contrast to yearsd ago when buyers always assumef that such firms were on solid financial saidPatrick Watkins, president of the Austin-basedd Watkins Insurance Group. Potential customers are more frequentlgy enlisting brokersand third-party rating servicesd such as Amerivest before signing with insuranced companies, he said. “Ib the past, we had financialk companies offeringlower prices, and consumers would trade lowe prices for greater risk,” he said.
“Now there’s been a flight to quality.” Buyers are also shoppinf more for insurance as a way to cut industryexperts said. The recession, alontg with its layoffs and cutbacks, is promptingt consumers to look closer at their policies and saidErik Josowitz, spokesman for All Web Leada Inc., an Austin-based company that connects insurance companies with potential customers via the Internet. During the first customer requests increased 62 percenty versus the same quarterlast year, he said. Josowitz attributeds the rise to the economy and cost cuttint combined withthe laid-off workers losing company-provided health insurance benefits.
Since the average household spends 8 percent of its incom eon insurance, he said, it becomes a legitimate place to look to cut “Across the board, there’s a lot more peoplee looking to save money on insurance.” Meanwhile, expertsd said the fast pace of mergerd and acquisitions has slowed Nationwide, the number of agenciees has remained the same since according to a Decemberr study by the Independent Insurances Agents & Brokers of America. The change indicatesd a decline in acquisitions combined with an increasre in the number ofstartup agencies, officials said.
experts expect M&A activity to resums when the economy rebounds from the global Watkins Insurance is mirroring the nationalp stalled consolidation trend duringthe recession. Having bought 14 otherf firms during the last 10 theagency hasn’t made an acquisition since 2006, Watkins said. with 102 employees, is one of the largest independenty insurance companies in the Local competitors include Frost Texas Associates Insurors and Capital City InsuranceAgency Inc., VanDelindert said. The number of firms in Texas has declinesdfrom 3,000 to 1,800 during the last 15 years, VanDelinded said, because insurance firms want to deal with fewe r agents.