Insurance Industry Competition: How Competition Leads to Lower Premiums

Generally soft market conditions within the insurance industry enable you to find the cheapest auto insurance by comparing providers online.

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Finding cheaper car insurance rates can save your family hundreds of dollars per year.

Finding the cheapest auto insurance allows you to save money while still providing excellent protection standards for your financial safety.

Savvy investors understand that the thinned competition throughout the insurance industry has caused premium rates to drop so low that they have nowhere else to go but up. Leading CEOs from major corporations agree that market conditions for insurance-based investments are better than they have been in at least 4 decades.

You see, especially in the insurance industry, premium rates that continue to drop cause a surplus of demand – and simultaneously create a deficit of supply. Consider the following:

  • When there are more competing insurance providers in the insurance industry overall, premium rates drop.
  • When premium rates drop significantly, the word gets out. Public demand for insurance increases with high correlation in regards to how affordable it is.
  • When premium rates are very low, people who never would have otherwise, purchase insurance policies.
  • Increasing the number of policyholders increases the risks assumed by a given insurance company.
  • Increased risk factors in the insurance industry causes some competitors to drop out of the game completely.
  • Fewer competitors in the insurance industry causes a decreased supply.
  • According to the most basic economic laws, decreased supply causes an increase in price.
  • And of course, when an industry is showing signs of increased pricing schemes, competition will again increase.

And so the cycle continues – insurance has always been a cyclic game. So, how does all of this affect you?

Well, right now you’re in a great position as a prospective consumer of insurance policies. You have massive bargaining power. Your dollar holds excellent value with major insurance providers. At this point in the insurance cycle, competition is high. That means premium rates for the cheapest auto insurance available are low. And that is when you want to purchase your insurance policies!

To give you an example of just how much premium rates have been plummeting, consider the following:

  • In the first fiscal quarter of 2008, major insurers enjoyed premium rates of 13.5%.
  • By the fourth fiscal quarter of 2008, those premium rates had dropped to 6.4%.
  • And by the second fiscal quarter of 2009, they had further reduced to 4.9%.

Hurricane Katrina, the collapse of AIG – and the devastation of country-wide real estate markets have all acted in conjunction to begin creating hard market conditions within the insurance industry. Things are changing. Competitors are positioning themselves to come in as the premium rates begin to rise. That’s why now is an excellent time to purchase your homeowners, health, life and automobile insurance. You can begin by finding cheaper car insurance rates online today. It’s fun, fast, convenient and easy. So Enjoy!

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