The industry has just come through the hardest market in 40 years. Premiums have increased fast, growing by almost 40% in the last five years. Carrier profits hav
e been at record highs now for three consecutive years ($398.3 billion in net income). And yet, some companies are so incompetently managed, they have effectively gone backward and have not made any money.
At the agency and insurance distribution level, ask yourself this question: How is a carrier that cannot grow in the most rate inflationary environment in
two generations going to help me grow? They clearly do not have some combination of executive abilities, surplus, products, price competitiveness, or talent.
From a carrier perspective, it’s a great time to start poaching key people and accounts, because these losing carriers cannot compete. Many are on a downward spiral.
Here are the facts (all based on net written premium using AM Best data; I have focused on the top 90 carriers by NWP because they write 90% of all premiums):
4% of the top 90 carriers had negative growth for two consecutive years ending in 2024. With the hardest market and fastest industry growth in two generations, how they managed to shrink is beyond me.
13% had negative grow
th in 2024, and 16% went backward in 2023.
The greatest volatility is with carriers ranked 31-50 in market share. The carriers in these two deciles
grow and shrink faster and move in and out of the top 50 more often. In other words, the carriers ranked 31-50 are not the same year after year.
The average NWP of the carriers ranked lower than 200 is only $36 million. That means the largest agents and brokers, as judged by market share, are multiple times l
arger than carriers, completely shifting the power dynamics. Some of these small carriers are controlled by brokers or even owned by brokers. Does anyone have reason to wonder who gets the best business?
Small Carriers
Small carriers cannot afford losses. Small carriers, captives, risk retention groups (RRGs), and self-insured groups (SIGs) had better be writing the cream. If they are w
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riting the cream, then cumulatively, this is creating adverse selection for the carriers who cannot get their acts together, and considerable evidence exists that many carriers are being saddled with adverse selection.
Small carriers, if not controlled by insurers or brokers, may also be unable to afford the same level of technology, personnel, and reinsurance, and they must avoid being targeted with adverse selection. This is evident when
comparing the results between mutual carriers and stock carriers. The stock carriers have far outperformed the mutual carriers in premium growth, surplus growth, and espe
cially profit margins. However, this is not exclusive to small mutuals as described below.
A plethora of small carriers also means a lack of regulatory control. In many areas, these small companies need more regulatory oversight, and DOIs are not adequately staffed to provide it. These small companies cannot afford int
ernal controls unless they achieve far better loss ratios, and if they do, the traditional shrinking companies will be saddled with more and more adverse selection.
These factors are why, even in the hardest of markets, traditional admitted commercial lines did not grow when adjusted for rates. Actually, it shrank. Again, this shows that many admitted carriers are in a downward spiral.
Mutuals
Being small is not the entire story. Some larger mutuals have some of the worst results. There are several notable, very large carriers that have not materially grown in 10 years. If adjusted for inflation, they are approximately 50% smaller than they were 10 years ago, and they are almost never profitable.
Looking into the future, a solid prediction is fairly obvious. Quality carriers with highly competent boards of directors and C-suites, which are more likely to be stock carriers with scale, are far more likely to provide the products, rates, underwriting, and overall competitiveness agencies need. There are a few mutuals, though, that have better C-suites with real directors on their boards who can compete. The others likely will increase the speed of their downward spirals or be sold.
