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CHARACTERISTIC OF AMERICAN INSURANCE MARKET
INFRASTRUCTURE
Sholoiko A.S.
PhD (Economics), Associate professor of the Department of Insurance, Banking and Risk-Management, Taras Shevchenko National University of Kyiv
ABSTRACT
The aim is to characterize the main elements of American insurance market infrastructure. Methodology. Next methods were used to achieve the aim: information collection and generalization. Results. American insurance market, where non-life insurance dominates, is one of the biggest in the world, because a share of total premium volume in the world GDP is over 2% during research period. One of the factors of such indicator is an activity of the infrastructure elements of American insurance market. The main elements of American insurance market infrastructure were founded more than 50 years ago and more than century ago. All of them keep history and traditions of insurance to improve the level of ethics of insurance experts and insurance culture of consumers and stimulate the development of American insurance market. The main infrastructure elements of American insurance market advocate for an attractive business environment, provide tools and opportunities for research, education, support and growth though exchanging ideas, information and experience. Value. This study has shown that American insurance market became advanced also due to significant contribution of the infrastructure elements of insurance market in development of insurance. Thus it is necessary for emerging insurance markets to build an effective infrastructure of insurance market to achieve such level of growth.
Keywords: insurance market, infrastructure elements, insurance associations.
Introduction. American insurance market belongs to advanced insurance markets in the world. It is explained by level of development of infrastructure of insurance market. Therefore it is vital to investigate the main elements of American insurance market infrastructure to make conclusions for emerging insurance markets.
Analysis of recent researches and publications.
The quite important issues of a personal insurance are reflected in [1, 3, 4, 5]. Numerous studies are devoted
to American property and liability insurance [2, 3, 6, 7]. But there has been little discussion about American insurance market infrastructure.
The purpose of this investigation is to characterize the main elements of American insurance market infrastructure.
Results and discussions. It is necessary to consider the development of American insurance market from 2012 to 2016 before characterizing the elements of American insurance market infrastructure (Table 1).
Table 1
The development of American insurance market from 2012 to 2016
Trends
Indicator 2012 2013 2014 2015 2016 2014/ 2012 2016/ 2014
Life insurance premium volume, bln of USD 693,83 661,11 660,80 668,00 678,0 4 î
Non-life insurance premium volume, bln of USD 872,78 900,35 915,27 921,00 937,4 î î
Total premium volume, bln of USD 1566,61 1561,46 1576,07 1589,00 1615,4 î î
Insurance density: premiums per capita in USD 1649,2 1627,4 1637,8 1610,0 1636 4 4
Insurance penetration, % 6,8 6,42 6,29 6,42 6,5 4 î
Total premium volume as a share in the world GDP, % 2,21 2,11 2,04 2,18 2,14 4 î
Share of North America in total premium volume, % 89,20 88,55 88,69 90,06 90,81 4 î
Source: compiled by the author based on Swiss Re Institute's data [8, 9, 10, 11, 12].
As can be seen from the table 1 American insurance market, where non-life insurance dominates, is one of the biggest in the world, because a share of total premium volume in the world GDP is over 2% during research period. Most indicators of the development of American insurance market except non-life insurance premium volume and total premium volume were decreasing from 2012 to 2014 and most of them except insurance penetration were increasing from 2014 to 2016. A share of North American insurance market in total premium volume is over 90% in 2015 and 2016. One of the factors of such indicators is an activity of the elements of American insurance market infrastructure.
Characteristic of the main elements of infrastructure
Therefore characteristic of the main infrastructure elements is represented by the oldest organizations of North American insurance market such as: American Risk and Insurance Association (ARIA), American Insurance Association (AIA), Insurance information institute (I.I.I.), Society of Insurance Research (SIR), National Association of Insurance Commissioners (NAIC), The Independent Insurance Agents & Brokers of America (Big "I"), The Insurance Brokers Association of Canada (IBAC), National Association of Public Insurance Adjusters (NAPIA), National Association of Insurance and Financial Advisors (NAIFA) (Table 2).
Table 2
of North American insurance market
Element Characteristic
American Risk and Insurance Association (founded in 1932) The premier professional association of insurance scholars and other thoughtful risk management and insurance professionals. Through ARIA, members receive many valuable tools and opportunities for enlightenment, growth and education. ARIA provides networking, information, and support on important insurance issues
American Insurance Association (founded in 1866) Is the trade association for today's leaders in the property-casualty insurance industry. AIA has an unparalleled record of advocating on state, federal and international issues for insurers and their customers. AIA comprises more than 320 companies, collectively writing more than $125 billion in premiums each year
Insurance information institute (founded in 1959) The leading independent source of objective information, insight, analysis and referral on insurance for a wide range of audiences, including: Consumers, insurance professionals, the media, government and regulatory organizations, educational institutions and students. The I.I.I.'s mission is to improve public understanding of insurance through offering a wealth of research such as the annual Insurance Fact Book
Society of Insurance Research (founded in 1970) It provides a forum for the free exchange of ideas in all areas of insurance research. It has expanded to marketing and planning, as well as research. The Society includes representation from many different organizations; insurance and non-insurance companies, government agencies, institutions of higher education, and trade associations. Providing regular and valuable communications between these individuals and organizations is a major purpose of the Society. The activities of SIR are intended to provide opportunities to discuss current issues with fellow researchers and planners
National Association of Insurance Commissioners (State insurance regulators created the NAIC in 1871) Is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.
The Independent Insurance Agents & Brokers of America (founded in 1896) Is a national alliance of more than a quarter million business owners and their employees who offer all types of insurance and financial services products. Big "I" agents and brokers not only advise clients about insurance, they recommend loss-prevention ideas that can cut costs. If a loss occurs, the independent insurance agent or broker stands with the client until the claim is settled
The Insurance Brokers Association of Canada (founded in 1922) Is the national voice of Property and Casualty insurance brokers and an advocate for insurance consumers. IBAC represents the interests of both insurance brokers and their customers to the Government of Canada
National Association of Public Insurance Adjusters (founded in 1951) Advocates for public adjuster education and a high standard of professional conduct and ethics. NAPIA members have joined together for the purpose of education, certification, marketing opportunities, legal and legislative representation, scholarship and research, and promotion of the public adjusting profession
National Association of Insurance and Financial Advisors (founded in1890) Serving and representing insurance and financial advisors regardless of the products they sell or the focus of their practice. The mission is to advocate for a positive legislative and regulatory environment, enhance business and professional skills, and promote the ethical conduct of its members
Source: compiled by the author based on information from: [13, 14, 15, 16, 17, 18, 19, 20, 21]
The table 2 illustrates that 4 of aforementioned organizations were founded more than 50 years ago and 4 - more than century ago. All of them keep history and traditions of insurance to improve the level of ethics of insurance experts and insurance culture of consumers and stimulate the development of American insurance market. The main infrastructure elements of American insurance market advocate for an attractive business environment, provide tools and opportunities for research, education, support and growth though exchanging ideas, information and experience.
Insurance distribution channels in the United States
One of the significant elements of an insurance market infrastructure is an insurance intermediary. Number of insurance agents and brokers only in the U.S. is around 200 thousands bigger than in Europe [22, 23].
Insurance intermediaries play an important role in buying insurance by consumers. Insurance agents sold 40% of all insurance policies in the U.S. in 2016 (Table 3).
Table 3
in 2012 and 2016
Insurance intermediary Independent broker-dealers Career agents Independent agents Banks Full-service national brokerdealers Direct response Other
Market share in 2012, % 24 22 16 14 13 9 2
Market share in 2016, % 21 20 20 17 12 8 3
Source: compiled by the author based on information f
It can be seen from the data in table 3 that insurance intermediaries sell more insurance policies than insurers, because number of insurance agents and brokers per insurer was around 129 in 2016 [22]. Thus intermediary infrastructure in the United States is quite developed.
Conclusions. The purpose of the current study was to characterize the main elements of American insurance market infrastructure. This study has shown that American insurance market became advanced also due to significant contribution of the infrastructure elements of insurance market in development of insurance. Thus it is necessary for emerging insurance markets to build an effective infrastructure of insurance market to achieve such level of growth.
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