A Look At The Personal Automobile Insurance Market In The U.S.

The personal automobile line of insurance is among the best known product types in the U.S., as vehicle insurance is mandatory in most states in the U.S. The totalpersonal automobile insurancepremiums earned in the U.S. , which account for nearly 35% of the total property and casualty insurance premiums in the country, stood at about $186 billion in 2014. Of the insurance companies we cover, two have a significant presence in this space - Travelers ( TRV ) and Hartford Financial ( HIG ). Travelers has a share of about 1.8% in the U.S. personal automobile insurance market, while eleventh-ranked Hartford has a market share of about 1.4%. State Farm Group is the market leader with nearly a 19% share. In this article we take a look at the personal automobile insurance market in the U.S. and what has driven premium growth.

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U.S. Personal Automobile Insurance Market

Personal automobile insurance premium volume has grown at a steady pace of over 3.5% over the last three years. This has come on the back of a recovery in the U.S. economy as well as improved consumer sentiment. The U.S. auto industry has picked up since the financial crisis, bouncing back to 16.5 million units sold in 2014 from a low of just 10.4 million units in 2009. It is expected to rise to about 17 million units in 2015. This should drive positive growth in insurance demand as well.

The increase in premium volume has also been due to pricing hikes resorted to by insurance companies in order to maintain margins and offset low yields on investments. Investment yields have been under pressure since the recession due to the near-zero interest rate environment that the U.S. Fed has maintained in order to stimulate economic recovery. This has resulted in a decline in investment yields for Travelers and Hartford, thereby necessitating an increase in prices.

Insurance companies have also been focusing on improving underwriting discipline. One of the emerging trends in the sector is that most insurers are employing data analytics to improve underwriting discipline, and also using technology to monitor the driving habits of drivers that help them determine risk and charge premiums accordingly. This is helping the companies to manage risk and should have a positive impact on margins.


Going forward, there are two factors that will impact growth in the personal automobile insurance sector in the U.S. The expected growth in automobile sales in the country should drive demand for auto insurance and aid the expansion of the market. We expect total personal automobile insurance premiums in the U.S. to cross $200 billion by 2017. Additionally, we expect bond yields to gradually improve, as interest rates are likely to increase to some extent in 2015. This will also lift bond yields and in turn improve investment returns for the insurance companies. However, the increase will be gradual, and there will still be some near-term pressure on insurance companies to resort to price hikes.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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