If you’re not paying enough attention to what’s going on around you, you can quickly become obsolete. For an example of just how a market can dramatically change, Matt Ohrnstein thinks collision repairers can think of themselves as a dairy farmer some years ago.

“You owned a farm, milked the cows, pasteurized it, put it in bottles and had trucks deliver it to customers’ homes,” said Ohrnstein, the former CEO of Caliber Collision Centers who now serves as managing director of Symphony Advisors, a California-based consulting firm focused on the automotive insurance and aftermarket. “But if you believed that supermarket chains would never be the prevailing distribution system for milk, you’d have long been out of business.”

Ohrnstein said the way consumers, insurers and shops interact is going through similar changes. GEICO is among the carriers changing how insurance is sold by selling direct to consumers rather than through agents. Allstate and Progressive are handling repairs for their customers either through shops they own or shops they choose for the insured.

Whether such changes will be successful long-term remains to be seen, but Ohrnstein said to ignore them seems a sure way to go the way of the dairy farmer’s home delivery system.

Key insurance industry trends

Speaking at an industry event recently, Ohrnstein said there are a number of inter-connected trends within the insurance industry of which collision repairers should be aware. They include:

•Acquisitions and changing market share. Although Sullivan’s data suggests State Farm remains the clear leader in terms of auto insurance market share with 17.5 percent in 2006, that’s nearly two points lower than State Farm’s 19.3 percent share in 2002. Perhaps not coincidentally, Progressive, now the No. 3 largest auto insurer, saw its market share rise 1.8 percent to 7.4 percent over that same period. (Allstate’s market share as the No. 2 carrier was at 11.2 percent last year, up from 10.6 percent in 2002).

But experiencing even more growth than Progressive has been No. 4 GEICO, whose 2006 market share of 6.8 percent is more than two points higher than it was in 2002. That left the next six largest carriers with virtually flat market share performance (Farmers, USAA, AIG, American Family) or declines (Nationwide and Liberty Mutual). But Ohrnstein also points out that the overall concentration of the auto insurance market has continued.

These Top 10 auto insurers combined have 63.5 percent of the market, up from 61 percent five years ago. Nationwide’s acquisition of CNA and AIG’s acquisition of 21st Century just continue this trend. These types of acquisitions, Ohrnstein said, are something repairers should pay attention to, because they can easily involve companies with which you do – or want to do – business.

•The advertising blitz. It’s hard to miss the onslaught of geckos and cavemen on TV and other advertising mediums and there’s a good reason for that. Insurance advertising spending is at a record high, $3.5 billion last year, about twice what it was annually in 1999 through 2002, and even half a billion more than it was in 2005. Allstate, Progressive and Nationwide are each spending 2.2 percent of their private passenger auto insurance premium on advertising, and GEICO is spending a whopping 5.7 percent. (By comparison, State Farm is spending 1.1 percent, perhaps why it is losing market share.)

Ohrnstein said this trend has implications for repairers.