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Greetings!
Welcome to our Winter of 2011 Newsletter!
MarketStance is pleased to update you on our recent happenings: update from 2002 NAICS to 2007 NAICS, Liability Benchmarking revised and updated, SIR (Society of Insurance Research) presentation synopsis, introduction of new data sources, data tips and tricks and the debut of our Top 50 Report. For your viewing pleasure we have inserted images and graphics best seen as an html document, if you are having trouble viewing this email Click here.
Happy Holidays from all of us at MarketStance to all of you. We wish you a happy holiday season!
The MarketStance Team
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Spotlight on the Top 50 Report
MarketStance has taken Market Intelligence reporting for insurance to a whole new level!
It's real, actionable market intelligence that's ready to use!
As an addition to MarketStance's core product, Commercial Insight, this new dynamic reporting platform is designed to provide a dashboard view of essential information for a state or county - and it's interactive!
MarketStance combined several commonly used reports by our clients and placed them into the interactive dashboard making access to market intelligence easier for all users - home office personnel, executives and field personnel - and a variety of disciplines ranging from distribution to underwriting.
Each line of coverage that is available from MarketStance is represented in the report suite:
BOP, Property, Liability, Commercial Auto, Workers Comp,
Boiler & Machine and Inland Marine.
Key Report Attributes:
- Choose any individual line or choose All Lines to see a list of the Top 50 SICs by the desired geography.
- The SICs will be ranked largest to smallest based on the line of coverage chosen.
- In addition to producing a list of the Top 50 classes of business, selecting any one of the SICs will dynamically change the information in the three graphical images at the bottom of the screen, capturing the premium distribution by size of account, the recent and projected growth in exposures and the premium potential by line of coverage.
The top 50 classes of business can be exported to Excel with a click of the mouse. Not only will the Top 50 classes export, but the number of businesses for each class as well as the premium for each of the lines of coverage - not just the individual line chosen for the report.
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Data Version 11.0 Shifts From
The good news is that when the government switched from classifying businesses using the Standard Industry Classification System (SICs) to using the new North American Industry Classification System (NAICS) in 1998 they also committed to keeping up with new and evolving technologies and businesses by committing to revising the classifications every five years. The bad news is... well you know how the rest of this goes.
The switch from 2002 NAICS to 2007 NAICS has brought with it the creation of 26 new SIC codes to support the new details captured by the 2007 NAICS. A number of NAICS classifications were dropped in the new 2007 codes among them, Paging (NAICS 517211) and Internet svc providers (NAICS 518111) and a number were added. What this means is that the bridges MarketStance built to translate from NAICS 2002 to SIC required an overhaul and new SIC codes needed to be added and some SIC codes needed to be deleted.
The chart below shows the dropped SIC classes:
In the case of Laboratory apparatus & furniture (SIC 382100), this category has expanded considerably under the new NAICS codes and now reflects various types of laboratory apparatus and furniture manufacturing rather than having all types of apparatus and furniture included in a single code. This required MarketStance to add quite a few new SIC codes to accommodate the additional detail in the new NAICS as you can see in the chart below.
For a full accounting of the changes that have taken place, please refer to the Technical Release Notes on our website using this link: MarketStance Version 11.0 Technical Release Notes
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Changes to Liability Premium Benchmarking
Clients will notice very significant changes to the state distribution of liability premiums in our Version 11.0 data, resulting from numerous factors, such as the first-ever tabulation of D&O premiums by the NAIC and a completely updated and revamped E&O model. However, perhaps the most accuracy enhancing and far-reaching changes revolve around how MarketStance estimates reconcile to statutory data provided by A.M. Best and the NAIC itself.
Historically, MarketStance has benchmarked our direct written premium estimates to the statutory data, as presented by A.M. Best in its state by line property and casualty product. One weakness of the statutory data concerns the relatively large proportion of premiums tabulated by A.M. Best as "Other Liability" and "CMP Liability" without further detail that would allow more accurate benchmarking, particularly in terms of the MarketStance lines of coverage: Premises & Operations, BOP, D&O, E&O, EPLI, and Fiduciary liability.
Another weakness involves the fact that premiums written on accounts with operations in multiple states may not necessarily be reported in each of these states. For example, consider a national accounts enterprise with operations in Texas, Louisiana, Michigan, and California. Under NAIC guidance, it is perfectly plausible for a carrier to report Other Liability premium solely to the statutory authority in Texas, if the one policy covers substantially similar operations in Louisiana, Michigan, and California. In other words, there is no necessary correspondence between the state where sales or payrolls are made and the state or states where statutory data tracks the corresponding liability premiums.
Version 11.0 of the MarketStance data attempts to address both of these weaknesses. In prior editions of the MarketStance data, our liability lines of coverage were benchmarked to the sum of Other Liability and Commercial Multi-Peril Liability premiums reported by carriers in each state. As we have long recognized, this was a relatively coarse treatment of the liability market-both unavoidable and undesirable, but the best we could do given the source. In the 2009 premium reporting y ear, A.M. Best began breaking down the Other Liability premium into Claims Made & Occurrence parts, providing a solid ground for us to review our benchmarking procedures. After careful consideration by Tom Quinn, our Vice President, Underwriting Services, the MarketStance R&D team implemented a major change in our benchmarking procedures, reflecting the two different forms of policies tracked by A.M Best. We now benchmark Special Liability lines (x-D&O, which is benchmarked separately to the NAIC U.S. total) to the Claims Made part of Other Liability, and Premises & Operations and BOP liability to sum of the Occurrence part of Other Liability plus Commercial Multi-peril Liability. In terms of the second problem, that premiums reported to statutory authorities in a given state may not reflect the exposures in that state, we implemented a weighting factor, whereby about 70 percent of the premium benchmark is driven by the state-level statutory premiums, but the remaining 30 percent is driven by the U.S. total. With this improvement in accuracy, MarketStance liability premiums in a given state do not tie out to the statutory data, reflecting what we believe are the actual reporting practices allowable under NAIC guidance. If you'd like to discuss our methodologies regarding the Liability market in more depth, please contact Client Services at ms@marketstance.com or call MarketStance Support (860) 704-6381 and they will arrange for a discussion with our Production Group.
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SIR (Society of Insurance Research) Presentation Synopsis and Premium Forecast
At the 2011 SIR conference held October in Long Beach, CA, MarketStance released its first-ever forecast of Commercial Lines premiums. In his remarks to the conference Eric Price-Glynn, AVP and Economist, Property & Casualty Research & Development for MarketStance forecast that "Commercial Lines premiums will grow modestly next year, in line with our baseline exposure forecasts, at 4 percent annual rate.
Price-Glynn pointed out that a key factor for carriers to recognize is that states will likely continue to differ dramatically in the recovery of their business insurance markets from the recession. "These differences matter a great deal more than the state of the economy or business insurance market in the U.S. as a whole. Look at almost any action a carrier might want to take. Deciding which states to target for new or renewal business, managing claims, managing distribution - the relative strength of each state matters a whole lot more to the origination and implementation of most any. It is too bad that correctly calling the level of gross domestic product two years down the road gets so much attention in some industry circles, since understanding the relative strengths of markets matters a lot more."
MarketStance's premium forecasts show Texas, Louisiana, North Dakota, and Oklahoma continuing to drive the premium growth story, moving forward, thanks to their booming oil and gas sectors, while Michigan, Ohio, Rhode Island, and Pennsylvania's recovering manufacturing sectors help put them in the top half of states when ranked by expected rates of growth in commercial lines premiums. In contrast, New York and New Jersey premiums will grow substantially below the national average, with premiums barely climbing at the rate of inflation, thanks to continued job cutting in financial services.
"You have a lot of people focused on recession - yes or no - when the real actions most carriers could or would want to take, recession or not, have much more to do with the relative opportunities in one state versus another, one industry sector versus another, one line of business versus another-questions where we believe there is reasonably hard exposure data that informs our premium forecasts.
MarketStance hopes to help reshape the conversation in the industry. We hope to help carriers become a lot more comfortable acting on state and industry specific exposure and premium forecasts rather than being incapacitated by the US macroeconomic outlook, dire as it sometimes seems, or frozen by other harder-to-forecast variables, such as the state and local trends in pricing by line of business or the state of the asset markets in the coming year.
If you'd like to learn more about our premium forecast capabilities, please contact your Relationship Director or reach us at sales@marketstance.com.
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Client Services Provides
Interactive, Hands On Sessions to Test Drive MarketStance Database Products and Support Services
Our focus at MarketStance is delivering accurate, reliable market and insurance information to our clients in the P&C insurance industry, but your relationship with us does not end with just a database purchase.
As an integral part of your subscription and access to that information, MarketStance Client Services strives to foster relationships where close touch service enables our clients to realize ever increasing value from their purchase. Product training is part of every database subscription however, more and more, MarketStance is seeing a need for our prospects to have a desire for some hands on experience with the data and reporting interfaces - prior to purchase -- in order to better understand just how powerful the MarketStance information products, reporting applications, and client support services can be and the types of business challenges that can be solved.
As a taste of the level of service MarketStance supplies to our clients -- in addition to the flexibility of the database reporting applications -- valued client prospects have received the opportunity to visit the training center at MarketStance's home office in Middletown, CT to benefit from hands on working sessions with access to the Client Services team and even our industry experts and analysts! To realize the full value of those interactive sessions with the MarketStance staff, we take the time to discuss the prospects' business needs, focus, and goals. Even more, the exposure to these sessions has not been limited to the audience in attendance. Following training and working sessions, client prospects have connected with a broader audience in their home or field offices via web conference, to share their experience and show off their newly found expertise at slicing and dicing data using the MarketStance platform.
The reception from those on the other end of that web conference has been exciting. With comments such as, "What would normally take me over a week, I just did in less than an hour," being a common sentiment, prospects have left sessions eager to gain access to MarketStance databases through the online reporting interface. To learn more about this type of hands on product experience, please contact your Regional Relationship Director.
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New Sources of Information in
Version 11.0
MarketStance has again updated the database that is the backbone for all of its products and services. The MarketStance database is updated three times per year with the fall update bringing the MarketStance data forward one year. MarketStance version 11.0 reflects data year 2010 and includes a major update of sources and three new sources of information.
NAIC publication of earned premiums for mono-line D&O
One new source of benchmark data for MarketStance is the first-ever industry filing of earned premiums for mono-line D&O published by NAIC.
Having this newly published information allowed MarketStance to completely revise our benchmarking procedures and as a result we currently report the D&O market to be $5.4B in the aggregate - more than four times the premiums estimated in prior versions. The use of this newly filed benchmark also required us to review our estimates of special liability covered establishments in all specialty lines - and we made substantial changes to those estimates as well.
American Community Survey 2005-2010
MarketStance has been using The American Community Survey as one of its data sources for deriving condo estimates, but for the first time MarketStance used information from the "American Community Survey 2005-2010" to validate high wage industries.
Utilizing the ACS enabled MarketStance to isolate industries where substantial fractions of employees earn high wages - such as investment banking - from industries where annual average wages are not likely to be that high.
2009 Business Dynamic Statistics
The third new source MarketStance used in the creation version 11.0 is the "2009 Business Dynamic Statistics" which allowed for an improved E&O estimation procedure. MarketStance conducted a class of business by class of business review of buying propensity, current filed rates, standard account minimums and rating methodologies in consultation with industry underwriting staff.
The result is that MarketStance now estimates premiums, covered accounts and covered exposures, uncovered premium potential and limits in force for over 230 classes of business. Clients who are subscribers to our Special Liability Advisor receive premiums for Premises and Operations and Products Liability as well as for the Special lines, D&O, E&O, EPLI and Fiduciary, and counts of covered accounts for each of the specialty lines.
Each year we advise our clients that they should not try to complete direct year-over-year comparisons. The reason is that the above additions and methodology changes are not unique so if a client does try, they will make erroneous interpretations.
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Finding Growth Opportunities & Interpreting Data within the Growth Advisor module
The Tech industry is at the top of mind for many carriers based on recent discussions and calls to the Help Desk, and for good reason too. Carriers writing E&O/Professional Liability premium will be interested to know that of all industries in the top 25 based on this premium potential, Custom Computer Programming Services and Computer System Design Services have little to no premium tied up in markets that are stressed. That being said, based on MarketStance's estimate of E&O/Professional Liability premium, there are several states where over half of the premium potential in these industries is stressed.
How did I learn this? Easily!
I simply identified those top industries based on total E&O Premium using the MarketStance Commercial Insight data. Next, by incorporating MarketStance Growth Advisor estimates of the amount of carrier written E&O Premium that is growing, relatively unchanged, or stressed (a.k.a. shrinking) across market segments, I was able to go a step further and learn if there were areas of the market that may not be so hot for tech opportunities despite an overall growth trend.
The key to turning the data into intelligence is to understand what the validated data tells you about the market landscape. Many users anticipate that there is but a single view across all locations, industries, business sizes and across varying granularity in the market. However, nothing could be further from the truth and by toggling between locations, classes and size, it is possible to find growth opportunities even in states that are generally considered to be without growth opportunities.
(Note this summary was based on an analysis at the National level by 6-digit NAICS classes and then at a state level for 2 6-digit NAICS classes for all business size segments using MarketStance v11.0 data.)
To learn more about the Growth Advisor, please contact your Regional Relationship Director.
The Reporting Application-
As a daily user of MarketStance reporting applications online, I am always trying to make report generation more efficient. One of the most common areas of report design that can slow down the process is hunting for the right industry class codes.
The search feature in the MicroStrategy report prompts selection page is a user's best friend when it comes to quickly pulling classes into the report. To activate the Search box above the Filter Selection box (step one in the Commercial Insight report prompts selection page), highlight the label next to the yellow box for the class code level you want to search under.
For example, if you want to quickly return ten 4-digit SIC codes, you simply:
- Highlight the 4-digit SIC label and the Search box will become white and allow you to place your cursor in it to type each code separated by a space.
- Click on the magnifying glass icon next to the Search space or hit Enter on your keyboard, and the classes will appear in the Available Filters box.
- Next, double click or highlight and click the right arrow to add to the Selected box.
- Then click to clear the results to return all filter options to the Available box.
- You can also search on strings of text...however, the search feature is not keyword coded so note that the text would have to be part of the class code descriptive label.
If you have any questions about this technique, please contact me at 860-704-6397.
Happy reporting!
-Katie
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