Like most other industries, the property and casualty insurance industry has faced its share of pain in the economic recession. But it has also brought some benefits to both agents and consumers.

At the end of 2006, there were nearly 17,000 agents licensed to sell property and casualty insurance in Arizona. At the start of 2010, there were about 19,600, according to the Arizona Department of Insurance.

While insurance can be considered a necessary evil, consumers aren’t always eager to buy.

“A lot of the new agents aren’t making it right now,” said Edmund Marquez, who has an Allstate office at 4420 E. Speedway, Suite 102. “They just really can’t get the momentum going that they need. However, a lot of the more established agencies are making it. They are dialed in with their customer service and are taking care of their base.”

Marquez said the industry as a whole is solid, but some things have been different.

“We used to write new homeowner policies all the time,” Marquez said. “When construction came to a standstill, so did the majority of the new homeowner policies. Foreclosures have also changed things. Mortgage companies are canceling homeowner policies as soon as they become vacant.”

Ron Williams, executive director of the Arizona Insurance Council, said this is happening because when banks repossess homes they move the insurance to a company they own.

“It just makes sense for them financially to do that, but it has been an issue for our agents in Arizona to show up to the office and find that another homeowner policy has been cancelled,” he said.

The changes Williams has seen in the industry as a result of the recession have been both negative and positive.

“Overall, the industry is very secure,” he said. “We are required to have an adequate amount of reserves to cover any potential claims out there. We have been seeing as people need to find more money each month looking at where they can cut back on premiums.”

Williams said what agents should be sure to help people avoid is cutting back on the amount of coverage to replace the home, building or business.

“You want to protect that,” he said. “The absolute last thing people need in a recession is an economic catastrophe. While home and property values have come down, generally speaking, the cost of replacing them hasn’t.”

To save money each month, Williams said agents and clients should explore the discounts that might be available to them. Or look at a small increase to the deductibles of the various items insured and see how that will lower the monthly premium.

Williams also said recessions tend to impact behavior of individuals and that often those changes will benefit the industry.

“Driving behavior is particularly affected as people will drive less to save money,” Williams said. “When people are driving less, it leads to reduced losses and increases the competitiveness of the industry.”

For example, from 2007 to 2008 – the most recent data available – in Arizona, property and casualty claims and losses rose 4 percent to $5 billion in 2008 from $4.8 billion in 2007.

“This is a very modest increase because the changes in automotive technology often makes them more expensive each year to replace,” Williams said. “So we are seeing fewer accidents right now, but they are costing more.”

Businesses also are becoming cheaper to insure as a result of the recession’s impact on jobs.

“The Arizona division of Occupational Safety and Heath reports that work place related fatalities in Arizona in 2009 dropped to the lowest level in two decades,” Williams said. “So workplace insurance, and workers comp and the commercial side of the business has been impacted by the recession too.”

Lanny Hair, executive vice president of the Independent Insurance Agents and Brokers of Arizona trade association has noticed that insurance agencies have been extremely sensitive to the need to change or “adjust” their operations to lower expenses. 

“As long as people own property, or drive vehicles – insurance is going to be required,” he said.  “Unlike some industries that can be considered optional the insurance industry provides a service that consumers and businesses continue to need regardless of economic conditions.”

So, although the costs of policies may be declining, and there are fewer enterprises to insure – the agents still provide a necessary service regardless of the condition of the economy.

“My advice to independent agents and others in our industry is to be quick to adjust expenses when possible and to always be looking for a new specialty to expand their operations,” Hair said. “I have always felt that marketing is the last department that should be reduced when sales drop, as it is the primary department that can replenish lost income.”

Contact reporter Joe Pangburn at jpangburn@azbiz.com or (520) 295-4259.
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