Car Insurance Is The Most Profitable Of The Industry

 Thursday’s Post  12.15.11 – Although there are thousands of car insurance agents throughout the United States; most are not aware the private auto insurance is the most profitable sector in the US Insurance market.  Revenue from auto insurance coverage remains high, despite the economic downturn and  the natural disasters which have led to major losses for most insurance companies the past two years. Reports show that car insurance companies received $165 billion in direct premiums for financial year 2010. This was more than double the $68.2 billion written on homeowner insurance policies, which accounted for 15 percent of overall market share. This makes auto insurance the biggest and most important sector in the insurance industry in terms of revenue and total earnings.  Personal line insurance policies, which consist mainly of auto insurance and homeowners insurance, account for over 50 percent of the total market share. This is greater than commercial insurance that now makes up 49 percent or $226 billion in direct premiums written annually. Nevertheless, findings from the report suggest that private auto insurance profitability is partly due to unexpected negative occurrences of risks in other lines of insurance. This is because the average growth rate for this sector from 2000 to 2010 was merely 2.8 percent. Auto insurance providers suffered measured growth, as the sale of new vehicles remained stagnated during the economic recession. Overall, homeowners insurance grew by about 6.4 percent during the same period, while other lines of the insurance experienced 3.6 percent growth. However, there has been minimal growth in profitability in the commercial insurance sector.  There was an over 20% drop in new business since 2005. Profitability also remains low since we have experienced so many recent natural disasters across North America.

Since the beginning of 2011,  hundreds of natural disasters have destroyed thousands of home.  Homeowners insurance providers paid $25 billion to compensate  policy holders.  A report from A.M.Best shows property and casualty insurance companies lost roughly nearly  $40 billion due to natural disasters. This is nearly double the amount paid out last year.  One of the biggest tragedies was Hurricane Irene.  By the time Irene blew out to sea, it had left over  $70 billion damage.


Michael E. Dortch
President &  Managing Agent
Corporate Home Office
618 South Broad Street
Lansdale, Pennsylvania  19446
(800) 807-0762  ext. 602