New marketplace developments will tend to favor larger personal lines carriers and prompt an exit of many smaller competitors, according to a new research study.

Conning Research & Consulting analyst Bruce Hale said analysis of the financial results of 2002-2004 found "significant" changes in the competitive landscape.

"A handful of larger personal lines market leaders, and a few outperforming specialist players, will soon be able to set and maintain aggressive pricing levels that will be untenable for many lagging insurers," the report said.

According to the study, in the new soft cycle, market leaders will earn tolerable returns as industry profitability slumps, while many followers will not.

"Because leaders will be satisfied with this new equilibrium, the soft markets could persist longer than previous cycles," the report said. "Many lagging companies will lose in the protracted war of attrition."

Thus, the duration of the new cycle along with the widening gulf between the haves and have-nots, will spur many personal lines insurers to weigh their strategic options. "Some will decide to get out," the study said, adding, "A shakeout is the result."

The study reported that those personal lines carriers with over a 70 percent auto book tend to have more favorable results than those with a more evenly divided mix.

In addition, multi-line companies with more than half of their volume in commercial lines performed worse as a group than personal lines dominant companies.

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P-C Shakeout Seen: Conning

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