P&C Insurers Shed Jobs

Employment in the property and casualty insurance industry declined in September 2010 compared to August, and declined by 2.9 percent compared to September 2009, casting doubt on hopes that industry employment trends were turning around, the Insurance Information Institute reported.

For p&c insurers, employment in September was down by 3,200 jobs, or 0.7 percent compared to August, according to an I.I.I. analysis of U.S. Bureau of Labor Statistics prepared by I.I.I. President Robert Hartwig. Employment dropped by 13,700 jobs compared to September 2009.

Steve Weisbart, I.I.I. vice president and chief economist, said hopes last month–when August job numbers for p&c insurers were reported as higher than July–that employment would continue to climb in the industry may have been more wishful thinking than fair analysis of data.

He noted that decisions on employment are not made on a month-by-month basis, even though data is reported that way. For p&c carriers, Mr. Weisbart said, employment decisions are made with an eye toward a multiyear sense of what an appropriate level of employment is based on the work insurers do.

He said insurers are currently under constant pressure to reduce their expense ratios, and “employment is obviously an important part of that.”

Separately, Fitch Ratings, in a report examining p&c insurer operating expenses, said that over the past five years “expense ratios have increased significantly, adversely affecting profitability and fueled in part by declining premium volume due to competitive market conditions and the economic recession.”

Chicago-based Fitch said the full-year underwriting expense ratio for 2009 was 28 percent, compared to 25 percent in 2003, using information compiled from Highline Data (a data affiliate of National Underwriter).

Fitch said that no “material market hardening” is expected in the near future, and because of that “insurers will continue to be challenged to balance expense structures and still maintain underwriting and service capabilities.”

Mr. Weisbart said in order to see a recovery in employment numbers, businesses overall must expand at a faster pace. He said there has been some recovery in this area, but it's been slow since the recession ended about a year-and-a-half ago. “That needs to speed up,” he added.

Additionally, for the p&c industry as a whole, Mr. Weisbart said when consumers are able to buy new cars and make other kinds of “durable goods investments,” more premium will be generated, which will provide a foundation for increased employment.

For agents and brokers, I.I.I. said employment in September dropped by 3,200 jobs, or 0.5 percent, compared to August, and by 17,800 jobs, or 2.8 percent, compared to September 2009.

Mr. Weisbart said a fairly large number of small businesses have failed or cut back through the recession, meaning that clientele for agents and brokers has shrunk.

I.I.I. noted that employment for agents and brokers is down by more than 53,000 jobs from peak employment numbers in December 2007.

Mr. Weisbart said that agent and broker income has been flat or down for around five or six years now, impacted by the multiyear slump in written premiums, which affects commission income. “That's undoubtedly caused some to leave the business,” reduce staff, or merge, he said.

Elsewhere in the industry, employment for reinsurers in September was up by 300 jobs, or 1.1 percent, compared to August, and down by 100 jobs, or 0.4 percent, compared to September 2009.

Claims adjusters shed 100 jobs in the month compared to August and 4,300 jobs, or 9 percent, compared to September 2009.

Already in November, more industry job cuts have been revealed, including some at American International Group, where a spokesperson confirmed that its general insurance subsidiary, Chartis, reduced its staff by less than 2 percent on Nov. 9.

“As part of Chartis' year-end review, we have conducted a resizing of our staffing levels across the organization to reflect our business objectives,” said AIG's Marie Ali in an e-mailed statement. “We continue to hire across the board where we see the best potential for growth,” she added.

(Additional reporting by Chad Hemenway)