Predictions for the 2001 Auto Market’
Predictions for the 2001 Auto Market?
Enforcing Uninsured Driver Laws Should Be A Top Agenda Item
What will the Texas auto market look like in 2001? The question is being asked at every professional meeting, on every golf course and wherever two or more agents are gathered together.
The answer depends on who’s fielding the question and their position in the industry. Regardless of who answers this question, though, the consensus is that next year will not look the same as 2000 and definitely feel different than 1999. What a difference a year makes.
The millennium began with a whisper of caution in both the standard and nonstandard auto industries. Carriers were concerned about profits from 1999 and losses were trending upward. Investment income seemed to be disappearing and market share was not increasing.
Then came the hard facts—the first quarter results came in and all the above became more than a feeling. Losses were up, investment income down, operational cost up and market share flat. Neither the second quarter nor the third quarter have shown any relief.
Reinsurers began to demand answers. For the most part, insurers’ profits dried up and reinsurers were increasingly tapped primarily because of inadequate rates.
Rates with most carriers had been flat or reduced for most of 1999 and these were from 1998. In some cases carriers had lowered rates below an actuarially sound position in hopes of capturing market share. This did not work because the competition just lowered their own rates, feeding the downward spiral. Now the free-fall has STOPPED! Stopped dead.
The changing forecast
The picture is changing in these waning days of 2000. Some of our more respected nonstandard auto carriers have canceled their programs. Others have said not in Texas anymore. Those that are still here in Texas are closely scrutinizing their books,
making both minor and major adjustments to their rates. These adjustments are all moving in the same direction—upward. All of this tends to make the life of the average independent agent more tense.
In addition to the hardening nonstandard auto marketplace, we have other factors with which to contend. E-commerce is attracting clients. Our customers aren’t leaving in droves, but the Internet is another insurance distribution source that was barely present in 1999. It’s here and growing.
Banks play another minor role. While not yet a major factor, banks’ distribution of insurance is definitely going to grow. Alternative distribution channels, a buzzword that generally refers to sales technique other than the local independent agent, is yet another factor. This is not new but it does seem to be growing.
None of these factors by themselves will radically change the way we do business, but taken together they present a growing challenge to the independent agent. Carriers are looking at any method they can to keep their cost down, grow their book of business and increase profit.
The 2001 Legislative session
If these concerns were not enough then “along comes SAM!” That is Uncle Sam and the Texas Legislature. This session will see efforts made to reshape the licensing procedure in Texas to comply with Gramm-Leach-Bliley, the federal bill passed last year that effectively tears down the barriers between financial institutions. Efforts will be made to strengthen the enforcement of the financial responsibility laws. There will possibly be a renewed effort at auto deregulation.
Who knows what lurks in those hallowed halls and who will be lurking in those halls come Jan. 1, 2001.
Mergers and acquisitions are yet another part of the changing picture. Not a day goes by that we don’t hear rumors about some company that is about to be purchased. This applies not only to carriers but to independent agencies, which are finding some of these “opportunities” too much to contend with.
Moreover, the average age of independent agents is increasing. There has not been an influx of young people selecting insurance as a career path. The lure of the high tech industry has taken its toll.
Does this mean 2001 will be bleak? I think not. Is there reason for concern? I think so. Is there reason for hope? By all means YES! The Texas Legislature has got to realize that for our industry to be stronger we need more insureds. More insureds mean more business. Texas needs to begin enforcing the law, encouraging uninsured drivers to purchase insurance. Everyone would win. Uninsured motorists coverage would become cheaper, the state would collect more premium tax dollars and agents would write more business. Just ask Georgia and Alabama agents.
Are more carriers coming to Texas? Yes. The Texas auto market is too big to be ignored by those in the industry and someone always thinks they have a better way of doing it.
So be ready for a great 2001—it will be a little bumpy. But my guess is that those agents who ride this train through to 2002 will look back and say “didn’t we have fun.” I know that I, for one, am looking forward to the challenges, opportunities and rewards in 2001.
The picture, as I see it through my panoramic camera, will be one with fewer but more stable carriers, more technology savvy agents and increasingly informed consumers.
There is no better place for agents to have their picture taken, to learn about the marketplace, to discuss all these topics and many more than at a local AIAT meeting or at the Trade Fair. Hope to see you there.
Mark Solomon is president, All Auto Insurance Agency in Dallas. He is also the outgoing president of the Automobile Insurance Agents of Texas.