THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Monday, January 20, 1997 TAG: 9701200252
SECTION: BUSINESS WEEKLY PAGE: 17 EDITION: FINAL
SERIES: 1997 FORECAST
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: 63 lines
For decades, it was a stable, predictable business.
But the insurance industry has been roiled in the 1990s by overcapacity, mergers and scrutiny from regulators. Insurance companies, agencies and their customers can expect more of the same in 1997.
On the property side, rising prices and reduced availability of homeowners insurance in coastal areas like Hampton Roads will continue to be an issue.
On the life side, there will be more consolidation. A major insurer the state, Lynchburg-based First Colony Life Insurance Co., was acquired last year by GE Capital.
Another merger involving a Virginia company is under way: Home Beneficial Life Insurance Co., based in Richmond, has agreed to an acquisition offer from American General Corp., a financial-services company based in Houston.
And in the health sector, the state's largest provider of health-care coverage - Trigon Blue Cross Blue Shield - is about to convert to an investor-owned corporation with shares that trade on the New York Stock Exchange.
The good news for insurance buyers is that most lines of property and casualty insurance remain readily available. But the highly competitive environment has restrained the earnings of insurance companies, prompting many to trim their operations and seek merger partners.
One exception is the availability of homeowners coverage in coastal areas, where insurers are trying to reduce their exposure to heavy losses from hurricanes.
Some large companies, including Allstate, have raised their rates sharply in parts of Hampton Roads. Others, such as Nationwide, have reduced the amount of new homeowners' insurance that their agents can provide in the region.
A proposal introduced in the General Assembly earlier this month would allow insurers to sell homeowners' policies in eastern Virginia without providing coverage for windstorm damage.
The bill would have the Virginia FAIR plan - the last resort for homeowners and businesses seeking property insurance - make special policies available for wind damage.
Under pressure from corporate buyers of health care coverage, health insurers have been cutting costs and acquiring competitors. Trigon Blue Cross Blue Shield won approval from its policyholders and Virginia regulators last year to convert to a for-profit company owned by investors. Trigon has been a nonprofit company owned by its policyholders.
Without additional capital to expand beyond Virginia, it would have been vulnerable to being acquired by an out-of-state company, Trigon told policyholders and regulators. The Richmond-based company expects to complete the conversion process in February by distributing stock to its policyholders.
Having publicly traded shares will make it easier for Trigon to buy other companies, but that also will make it easier for an expansion-minded rival to acquire Trigon.
The competitive pressures are being felt by Hampton Roads insurance agencies, whose ranks have been reduced by mergers. The largest locally based agency, Henderson & Phillips Insurance, was acquired last year by USI Insurance Services Corp. ILLUSTRATION: [Color Photo]
[Briefcase]
KEYWORDS: 1997 FORECAST INSURANCE