Conning: Expense control insurers’ profit key

A keen eye on expenses, rather than expanding into fresh markets, is the new key to profitability for life insurers, according to a new study by a Hartford insurance-industry research firm.

Conning Research & Consulting Co. said Tuesday an examination of the squeeze on life insurers' 2009 results from falling premiums and low investment yields indicates the industry must do a more consistent job of focusing on expenses.

"In analyzing individual life companies, we identified the low-cost companies and reviewed their approach to expense management," Conning research director Stephan Christiansen said in a statement.

"Our analysis indicates that scale appears to matter less than management may believe,'' he said. "Instead of trying to grow out of their inefficiencies, insurers that outperform use a rigorous and consistent approach to expense analysis and control to ensure long-term profitability."

The Conning study, "Life Insurance Expenses: Breaking Through the Edge of Efficiency" explores individual life insurance expenses, analyzes how much economies of scale and product mix influence a company's efficiency, and how much is more directly under the influence of management.