Insurance company ratings agency A.M. Best Co. says it is increasingly looking at auto insurers' distribution management practices when rating.

“Companies that can demonstrate defensible and sustainable competitive advantages—such as control over distribution, multiple distribution channels, low-cost structure, and the effective utilization of technology—are likely to be viewed favorable from a rating perspective,” A.M. Best states in a special report on the U.S. auto insurance market.

Clearly, the use of technology plays a large role in an insurer’s grasp of and flexibility to adapt to the market.

Insurers are using technology to distribute auto products directly and through multiple channels, as well as to strengthen singular distribution channels, according to A.M. Best.

The ratings agency notes consumers are increasingly at least using the Internet to shop and gather information about the auto-insurance purchase. Moreover, policies purchased online have risen steadily since 2004.

“The direct channel’s rise has been driven by aggressive marketing, competitive pricing, user-friendly online tools and innovative technologies, all of which can be funded with money once earmarked for agent commissions,” says A.M. Best.

In terms of market share, the top 10 private passenger auto writers haven’t changed in a decade but the share by the top two—State Farm (19.3 percent) and Allstate (10.7 percent)—has declined.

However, the order of the top 10 carriers has changed since 2002. Berkshire Hathaway’s Geico moved from 6 to 3. Progressive’s rank of 4 remained unchanged but its market share improved to 8.4 percent in 2012 from 5.8 percent in 2002.

The market share of the top 10 carriers increased to 69.8 percent from 58.8 percent in 2002.

Special Reports /

A.M. Best Eyes Auto Insurance Distribution Methods in Ratings

Related Stories

Recommended For You