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Top insurers' weight distorts purpose

August 20, 2002

Growing market dominance contradicts benefits of insurance, consumers pay the price

Inman News Features

As the top property and casualty insurers continue to devour market dominance they increasingly face staggering losses in the event of any single catastrophic event, while consumers pay the price of fewer choices, higher premiums and less coverage, according to a recent study conducted by Weiss Ratings Inc.

The growing concentration of the homeowners insurance market is a national phenomenon, according to Weiss, which reported that at year-end 2001, the top eight homeowners' insurers controlled nearly 60 percent of the national market compared with 26 percent in 1965.

"This (market dominance) directly contradicts the purpose of insurance, which is to spread risk," said Weiss VP Melissa Gannon. "Insurers and consumers are at great risk if a catastrophic event causes serious financial damage, leaving policyholders in danger of losing their coverage."

Eight large property and casualty insurers are exposed to nearly 70 percent of the home insurance risk in five hurricane-prone states, according to the report. The insurers are State Farm Group, Allstate Insurance Group, Zurich Financial Services Corp., Nationwide Corp., USAA Group, Citigroup Inc., Chubb & Son Inc. and Hartford Fire and Casualty Group.

State Farm and Allstate control the largest interests in the five states with 25.8 percent and 13.8 percent, respectively, while the others control interests ranging from 8.6 percent to 1.6 percent.

In seven Western fire-prone states, eight insurance companies are exposed to nearly 73 percent of the home insurance risk. The insurers are State Farm, Zurich, Allstate, USAA, Safeco Insurance Group, California Auto Group, American Family Insurance and Nationwide.

State Farm, Zurich and Allstate maintain the largest controlling interests in the seven states, with 23 percent, 19.8 percent and 13.6 percent, respectively, while the rest control interests ranging from 2.5 percent to 4.5 percent.

Weiss is an independent provider of ratings and analyses of financial services companies, mutual funds and stocks.

Copyright: Inman News Service

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