---

Standard & Poor's: Auto Insurance Proves to be a Stable Sector

15 June 1999

Standard & Poor's: Auto Insurance Proves to be a Stable Sector

    NEW YORK, June 14 -- Competition is heating up in the auto
insurance sector, with established players aiming for higher growth rates and
new market entrants attempting to carve out their own niches, says a
Standard & Poor's report on the auto insurance sector released today.
Continued strong capitalization in the industry supports a stable ratings
outlook, the report says.
    The full report is available on Standard & Poor's Web site at
http://www.standardandpoors.com/ratings/insurance.  To access the report from
the main page, select Business Sector Reports.
    The industry is expanding, as other insurers diversify their business by
entering the auto line, and new players (attracted by low capital needs and a
short liability tail) vie with major insurers for market share.  These larger
companies will benefit from economies of scale, which will increase pressure
on smaller providers to reduce costs, according to Standard & Poor's.  A list
of the 100 largest personal auto insurers is included with the report.
    Higher auto sales in the U.S. have brought an aggregate dollar increase in
auto premiums.  Insurers have also been able to hinder losses over the past
few years for several reasons, such as airbags, seatbelt and drunk driving
laws, and negotiations between insurers and auto body shops.  There have also
been new trends in distribution, as some companies are turning to
over-the-phone sales as well as Internet-based transactions.  This involves
the risk of alienating the existing agent force, so some insurers have
implemented different methods according to region, or simply decided to offer
the customer a choice of buying direct or through an independent agent.
    As the popularity of direct sales rises, it will become increasingly
important for the consumer to research the ratings of a company, for there
will not be an agent to rely upon for assistance in decision-making.  While
Standard & Poor's sees a stable ratings picture for auto insurers (as a result
of strong industry capitalization), individual players who cannot effectively
handle increased competition may run the risk of a downgrade.
Standard & Poor's rates insurers based on current and prospective positioning;
a triple-'B' grade or higher indicates a 'secure' company, while those below
triple-'B' are considered 'vulnerable'.
    Standard & Poor's, a division of The McGraw-Hill Companies, is the world's
leading provider of financial information, including credit ratings and risk
analysis.  Standard & Poor's letter-grade rating symbols have long been
respected as independent measures of an insurer's financial strength.  A
complete list of ratings on more than 4,000 insurance companies in
approximately 70 countries is available at
http://www.standardandpoors.com/ratings/insurance.
    -- CreditWire