Commentary: Insurance market improving for customers, particularly

The year 2005 is going to see a return of a highly competitive marketplace in the insurance industry. In fact, it's likely that the level of competitiveness may be unparalleled in recent history.

In my 25 years of experience as a property and casualty insurance broker, I've certainly seen the competitive pendulum swing to the extreme in both directions, but I've never seen a competitive situation taking form as this one appears to be doing --- everything is moving together in the same direction. I believe that we're in for some interesting times.

Typically, the extent of competitiveness in the insurance industry is a result of cyclical forces. However, this year there are two additional factors contributing, including one that is unique to Maryland.

The following are brief explanations of the competitive forces at work:

What goes up eventually comes down. The most recent period of high insurance premiums was set off by the events of September 11, 2001, and for the next three-plus years the high premiums were exacerbated by additional circumstances including the staggering losses as a result of the corporate scandals such as Enron and WorldCom.

Beginning early last year, insurance carriers began to recover from these losses and were even seeing some profits. By the third quarter, premiums were coming down and I see this trend continuing through this year.

State of New York investigations. New York State Attorney General Elliott Spitzer continues his investigation into the insurance industry that saw the world's biggest insurance brokerage, among others, singled out for reportedly leveraging its market position to the detriment of its customers.

One result of some of New York's continuing investigation is a growing distrust and skepticism by insurance buyers of the industry as a whole. For example, one of the ways this distrust is being handled by insurance buyers is to no longer do business with just one broker.

Instead, some firms have begun working with two or more of them believing that, by creating this competitive situation, they have a higher level of confidence that their best interests are the priority.

For Marylanders only. The third contributor to the competitive situation is the fact that the Maryland Insurance Department, under the able leadership of Al Redmer, has been quietly but diligently bringing carriers back to writing policies in Maryland, thereby increasing the pool of options for all of us and positively affecting premiums.

By reversing this trend that had been in place for several years, the Maryland Insurance Department has helped create a better situation for all of us: policyholders, carriers and brokers.

This 2005 forecast would be incomplete without mentioning Maryland's medical malpractice situation. I believe that the year will pass without seeing any resolution to this critical issue and I also believe that it will remain stymied unless real tort reform is realized.

Michael R. Murphy, the president of the Baltimore office of the national insurance brokerage firm of Hilb, Rogal and Hobbs, wrote this column for The Daily Record. The opinions expressed are his own. He can be reached at 410-582-8033 or Mike.Murphy@HRH.com.

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