P&C insurers must factor demographics, socioeconomic trends into growth plans: report

Property and casualty insurers in the United States need to consider some of the major demographic and socioeconomic trends happening in the country and factor them into their growth plans, notes a new report from research firm Conning.

“The U.S. consumer market is undergoing significant change in its social and economic structure with far-reaching implications for personal lines insurers, for the products they provide, and for their distribution strategies,” Alan Dobbins, an analyst at Conning noted in a statement.

“In our analysis we extend these current trends over time and find insurers will likely face a consumer base vastly different from what currently exists,” he said.

The report, 2013 Personal Lines Consumer Markets Annual, identifies four major changes in the consumer market: population growth, age profile, ethnic/racial diversity, and socioeconomic factors.

Similar to Canada, the U.S. is seeing an ageing population, as birth rates have slowed. The growing senior population will lead to changes for the industry, particularly in personal auto insurance, and the risk characteristics of that group will change, the report also says.

However, new immigration is also creating population growth in the country, and will “result in a vibrant youth component of the age structure,” the report notes.

In particular, the population of Hispanic and Latino people and people of Asian origin, is projected to increase and make up a greater portion of the U.S. total population over the next decade (naturally and through immigration), the report notes.

“Insurers are challenged to develop an understanding of how these different groups behave as customers currently, how behavior will change as immigrant groups assimilate into U.S. culture, and how the U.S. culture adapts to its new ethnic makeup,” the report suggests.

Socioeconomic factors are also having an impact on consumer trends, Conning says. The economic downturn has led to persistent unemployment and a decline in household income, both of which are having an impact on consumer purchasing power and spending patterns, according to the report.

Home ownership rates have also fallen, and multi-generational homes (where children live with their parents longer), are trends that insurers need to consider, it says. Reduced travel and reduced driving have also been consequences of the slow to recover economy.

All of these factors have led to a diverse personal lines market, that is “being carved into smaller niche markets to meet these evolving needs and preferences,” the report says. Those markets could include a high net worth consumer market, the youth market and seniors, it says.

Conning’s full analysis with more detail on niche personal lines consumer segments, is available for purchase on its website.