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Insurers Post First Sales Gain Since 2006 on Rates, Economy

U.S. property and casualty insurance sales rose for the first time in four years as carriers raised rates and individual and commercial clients expanded coverage amid an economic rebound.

Policy sales climbed 0.9 percent to $422.1 billion in 2010 from $418.4 billion a year earlier, the Insurance Information Institute, a trade group, said today in a statement. That’s the first gain since 2006, when sales jumped more than 4 percent to about $444 billion.

Carriers are adding to sales after businesses and individuals scaled back coverage during the recession. Allstate Corp., the largest publicly traded U.S. auto and home insurer, raised rates for residential coverage last year amid higher costs tied to natural disasters. Travelers Cos. said demand for coverage from businesses increased in the fourth quarter for the first time since 2008.

“Pricing has leveled off and most probably will start to go up,” said Shivan Subramaniam, chief executive officer of commercial insurer FM Global, in an interview yesterday at Bloomberg headquarters in New York.

Insurers rely on gains in employment, auto sales and home construction to stoke demand. The U.S. added jobs in each of the last six months and the unemployment rate fell to a two-year low of 8.8 percent in March. Auto sales ran at a seasonally adjusted annual rate of more than 12 million in each of the last three months of 2010, the fastest pace since August 2009.

Claims Costs

The gain in sales may increase claims costs, said Michael Murray, assistant vice president for financial analysis at ISO, a unit of Verisk Analytics Inc., which released the statement with the Insurance Information Institute and the Property Casualty Insurers Association of America.

“As the economy inches closer to full employment, inflation in the severity of claims may accelerate,” he said. “Economic growth may also spur increases in demand for insurance that absorb excess capacity faster than investment gains create it.”

Net income for the industry climbed 21 percent last year to $34.7 billion. Realized investment gains were $5.7 billion compared with a loss of $7.9 billion in 2009.

Policyholder-owned State Farm Mutual Automobile Insurance Co. is the largest home and car insurer in the U.S., ahead of Northbrook, Illinois-based Allstate. American International Group Inc. and Travelers, both based in New York, are among the largest sellers of commercial coverage.

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