Insurance Companies in the United States
The insurance tradition in the United States has been one and a half hundred years, and it seems that everyone is insured. According to the American Institute of Insurance Information Institute, the leader in the US insurance market is car insurance by individuals, with insurance premiums almost four times faster than homeowner’s insurance.
Insurance in the United States is divided into two sectors: life insurance and other types of insurance. The largest US companies in 2013 are: AAA Insurance, AIG Insurance, Allstate Esurance, GEICO, Liberty Mutual, 21st Century Insurance, AARP, Aflac, etc.
In 2011, insurance premiums in the United States amounted to $1.1 trillion, while premiums on life insurance and medical insurance amounted to 58%. Net insurance premiums in this sector amounted to 619 billion in 2011. Property insurance mainly consists of auto, home and commercial insurance. Net insurance premiums in this sector amounted to $442 billion.
In 2011, there were 6296 insurance companies, including property insurance (2686 companies), life insurance (1013), health (803). Insurance and related activities generated $405 billion, or 2.8% of US GDP in 2010.
2.3 million people were employed in the insurance industry in 2011. Of these, 1.4 million worked in insurance companies, including life and medical insurance companies (772,500 employees), property insurance (599,300 employees) and reinsurance companies. companies (26,300 workers). The remaining 883,600 people worked in insurance agencies, brokerage agencies and other companies associated with enterprise insurance.
Insurance companies paid $ 16.4 billion in life insurance and endowment insurance premiums in 2011, or $ 53, for every person living in the United States. Insurers paid $33.6 billion in property losses related to disasters in 2011, or more than double that in 2010 ($14.3 billion).
There is no single federal insurance law or a single federal insurance agency in the United States. Each state has its own insurance legislation and its regulatory body (supervision). Each state puts forward its requirements for the minimum capital level, types of insurance offered, conducts audits of controlled insurance companies, and carries out general regulation of insurance activities by issuing licenses to brokers, agents and insurance companies themselves.
There are two types of insurance companies in the United States: joint-stock companies (AO) and mutual insurance companies (OVS). There are no state insurance companies. Shares of joint-stock companies can be acquired by both an individual and a legal entity. The mode of creation and functioning of AO is quite tough. Historically, in the USA, insurance companies were mainly represented by mutual insurance societies. They are traditionally smaller than joint-stock companies, but the regime for the operation of the OVS is more liberal. As a result, OVS are widely used in the USA in life insurance (OVS carry out more than 40% of sales of insurance policies), insurance of agricultural producers – farmers (OVS control this market segment completely), in other types of property and liability insurance.
Insurance companies provide three types of insurance:
- benefits (life and health insurance, medical insurance, pensions, savings, etc.);
- commercial insurance (wide range);
- personal insurance (insurance of buildings, automobiles and other property of citizens).
The US insurance industry is the only one that does not fall under antitrust laws. The activities of all US insurers are carefully analyzed by three rating agencies: A.M. Best, Moody S, Standart & Poor’s, which analyze the status of insurance companies and quarterly publish catalogs where they publish official ratings of insurance companies in terms of their reliability and data on their solvency status. Some companies, especially brokerage companies, have special units for analyzing the activities of other companies. At the same time, the main factors by which the analysis is performed are the financial situation, claims payments and the level of service, safety and loss prevention, flexibility in the company’s work, cost of services (minimum tariff rates). The level of losses, income and profit ratio on investments and the level of receivables are considered criteria for the effectiveness of the insurer.
In the USA, there is an electronic database of all insurance companies, which makes it possible to distribute companies by risk, premium size, etc.
One of the most important features of the largest US life insurance companies is the fact that, due to the high authority of insurance companies, multibillion-dollar funds belonging to various pension funds are transferred to their management. The task of insurance companies in this case is to ensure the safety and growth of trusted funds through a reasonable investment policy. Insurance companies charge a fee for managing these funds. And even moderate sizes (0.1%) of the amounts taken into management bring millions of income.
The basis of American insurance companies is joint-stock companies and mutual insurance companies. There is an institute of underwriters and insurance brokers – insurance agents or independent brokerage firms. For example, one of the largest life insurance companies – the Prudential Society – has 22 thousand insurance brokers. Independent brokerage firms include Marsh-Macklenan, Alexander and Alexander, Freck Hall, Fred S. James, and others.
In accordance with the global trend in the American insurance market, the volume of costs is growing. In the early 1980s the cartel system for setting insurance premium rates, which operated throughout the post-war period, collapsed. The legislation actually encouraged insurance companies to conduct a unified pricing policy with respect to policyholders. In 1983-1984 in some states, restrictions on the movement of premium rates have been lifted. Due to intense competition, rates fell by 15, 30 and even 40%. This led to the fact that many small insurance companies, especially property insurance, suffered major losses.
The largest insurance companies in the world, primarily the United States, are financial conglomerates: through subsidiaries, they can also provide loans and borrowings, arrange check services for customers, issue settlement credit cards, carry out transactions with real estate, securities, manage property and capital on behalf of customers. There is further internationalization of the insurance business, where after fierce competition in the 1970s. there was a clear turn in favor of the United States.
American International Group (AIG) is one of the leading international diversified insurance groups and the largest insurer of trade and industrial risks in the USA. The group began its insurance operations in 1919 in Shanghai. Today it is a holding company that controls 44 subsidiaries in 130 countries, with about 28 thousand employees. All companies of the group are combined in six specialized branches.
Best rated insurance companies in the USA are also the Metropolitan Life Insurance Co. (New York, founded in 1868, the successor of National Travers Insurance), since 1915 it has been a mutual insurance company; Continental Corporation (founded in 1853); “Prudential Insurance Company of America” (1876); Allstein Insurance Company (1913) and others. Property insurance and liability of large US commercial and industrial firms provides an insurance premium of about $ 8 billion a year. The foreign business of American monopolies and the activities of foreign companies in the United States and other countries is $2 billion. The annual premium for life insurance is $9 billion. They have a highly developed insurance market, the offer of which includes about 3 thousand different types of insurance. In the United States, there are several thousand insurance companies whose insurance premiums exceed the income of insurers of all EU countries combined.
The powers of the states in regulating the insurance market are defined by the McCaren – Ferguson Act (1945). Each state has its own regulatory body – the department for supervision of insurance operations, headed by a commissioner who is appointed by the governor of the state (usually with the approval of the Senate).
In 2010, Congress adopted the Dodd-Frank Wall Street Reform Act and the Consumer Protection Act, which are considered the most radical reforms in the financial regulation of capital repairs since the Great Depression. Dodd-Frank Law has serious implications for the insurance industry. It is important to note that Section V of the created Federal Insurance Agency in the Ministry of Finance is authorized to monitor all aspects of the insurance industry and identify gaps in the state regulatory system. The Dodd-Frank Act also establishes the Financial Stability Oversight Department (FSOC), which monitors financial services markets, including the insurance industry, to identify potential risks to US financial stability.