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OLDWICK, N.J. - JUNE 05, 2003 12:00 AM (EDT)
Best's Review profiles four small insurers and examines the advantages and challenges such companies face in the magazine's June cover feature, "Little Fish." Small size in an insurance company carries few absolutes that don't apply to large companies as well, but in an industry that's grown enamored with scale, small insurers occupy a unique place.
Small insurers have advantages that are hard to duplicate in a large company-and potential problems that big organizations are less likely to face. They attack those challenges in ways that include increasing use of technology, careful nurturing of business relationships and meticulous attention to underwriting. Small companies' expense ratios tend to be higher than at large companies, but their keen focus on underwriting can yield enviable loss ratios.
Small insurers are usually less bureaucratic, allowing for quicker decision-making on new coverages or markets. Small life companies have been hotbeds for innovations that larger companies later copied. Close ties with local regulators can be invaluable to small companies, and many of them shudder at the thought of federal regulation-even in a limited form such as an optional federal charter.
Other worries for small insurers include concentration of risk and succession planning; the latter might rival financial problems as a factor in small-company mergers and acquisitions. The industrywide march toward consolidation awaits small companies that, through bad luck or miscalculation, can no longer go it alone.
The "Little Fish" package takes readers inside four small insurers that are successful in their niches: 5 Star Life Insurance Co., Alexandria, Va.; Pacific Specialty Insurance Co., Menlo Park, Calif.; Tuscarora-Wayne Mutual Insurance Co., Wyalusing, Pa.; and USPlate Glass Insurance Co., Westchester, Ill.
"Little Fish" is the latest presentation of in-depth reports from Best's Review designated "The Big Picture." These comprehensive packages, appearing several times a year, examine timely topics from as many angles as possible, providing more information, more possibilities, more ways of looking at things and more views from more people-in short, the big picture.
For a comprehensive overview of insurance industry news and trends, turn each month to Best's Review. Read about the hot-button issues in Property/Casualty, Life/Health and Insurance Technology. Discover the latest thinking on the issues that cut across industry segments. A new edition appears online on the first of the month at www.bestreview.com.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.