Conning Study Finds P/C Expense Revolution Overdue

June 25, 2004

mparedConning Research & Consulting, Inc. has released a study which concludes that P/C insurers’ cost of doing business “has stagnated over the past 20 years, contrasting the remarkable efficiency gains achieved by many other industries.”

As an example Conning compared P/C insurers with the banking industry, which has reduced its efficiency ratio by 20 percent since 1982, “while the property-casualty industry has remained fairly flat.” The study, entitled “Expense Revolution: Is the Property-Casualty Industry Overdue?” found significant opportunities in each line of business for improvements in expenses and, by extension, overall financial performance.

“We identified these opportunities by using standard industry metrics and by creating nontraditional measures for expense performance,” stated Bruce Hale, a Conning Research analyst and the report’s author. “This more detailed analysis clearly indicates a long-term opportunity to fundamentally change the industry’s performance. Expenses are the crucial controllable element in driving toward much higher returns on equity.”

“We know that insurers cannot sustain high-margin premiums, and claim inflation is largely beyond the industry’s control,” commented Stephan Christiansen, Director of Research for Conning Research. “However, the stagnant expense situation detailed by this study indicates a huge opportunity for the industry. Insurers who are aggressive in accurately gauging their expenses and taking action will create a true, sustainable competitive advantage.”

The study is available for sale from Conning Research & Consulting, Inc., by calling (888) 707-1177 or by visiting the company’s Web site at:

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