Market Outlook
Summary for FY’2023 and Market Outlook
Based on forecasted 2022 filed premium discussed in the prior section for revenue and transactions, the data models imply that we will bring in $38.7M in stamping fees by the end of 2023. This forecast is based on a submitted premium of $18.0B and prorated for the effect of late filings on the new stamping fee (aka “stamping fee lag”). This is a 10% increase over 2022. We also expect annual transaction counts to come in at 1,020,000 (14% increase). The fact that transaction counts growth may exceed premium growth is one indicator of a softening overall California market, ignoring the effects of inflation or other economic dependencies.
2023 Prediction
- 2023 Looks strong from an overall California Market perspective
- Fortunately, the market is still strong as 2022 winds down, which positively influences all models going into 2023. While growth is not as extreme as seen in prior years, several models indicate around an 10% increase in premium with a whopping 14% increase in transactions in 2022 or $18.0B and 1,040,000
- Market Outlook
- How are our members feeling about the current market and future outlook?
- We are seeing three indicators that current growth may slow.
- We have seen average premium go down ever so slightly in 2022 and forecasted for 2023, about 1% decline.
- Our forecast curve cycle continues to indicate decreasing average premium in the next couple of years. A lot of this is due to the fact that transactions are substantially increasing, thereby lowering the average premium per policy. Also, if we account for 8.9% inflation, could this indicate a flattening market?
- In middle of 2022, we saw an inversion of the premium curves for New Policies and Renewals. In a high growth market we see more new policy premium than renewal premium. Over the past few years, 48% of total premium is from new policies compared to 46% from renewals. This year we see renewal premium makes up 49% of total premium, while new policy premium accounts for 45%.
B-1: HISTORICAL PREMIUM AND TRANSACTION COUNTS AND FUTURE YEAR PREDICTIONS
| Year | Yearly Txns (Eff Date) | Yearly Prem (Effective Date) | Prem Pct Chg. | Avg. Prem/Txn | Avg. Prem/Txn Percent Chg. |
| 2005 | 485,662 | $5,701,505,970 | 1.4% | $11,740 | 0% |
| 2006 | 501,719 | $6,198,404,162 | 8.7% | $12,354 | 5.2% |
| 2007 | 482,484 | $5,717,249,660 | -7.8% | $11,850 | -4.1% |
| 2008 | 441,860 | $4,815,472,667 | -15.8% | $10,898 | -8% |
| 2009 | 426,698 | $4,569,698,599 | -5.1% | $10,709 | -1.7% |
| 2010 | 445,709 | $4,357,695,830 | -4.6% | $9,777 | -8.7% |
| 2011 | 465,150 | $4,430,548,650 | 1.7% | $9,525 | -2.6% |
| 2012 | 472,680 | $4,851,701,195 | 9.5% | $10,264 | 7.8% |
| 2013 | 502,748 | $5,498,831,369 | 13.3% | $10,938 | 6.6% |
| 2014 | 541,552 | $5,928,195,650 | 7.8% | $10,947 | 0.1% |
| 2015 | 588,873 | $6,414,495,103 | 8.2% | $10,893 | -0.5% |
| 2016 | 636,274 | $6,680,656,713 | 4.1% | $10,500 | -3.6% |
| 2017 | 684,048 | $7,251,962,014 | 8.6% | $10,602 | 1% |
| 2018 | 721,425 | $7,889,064,912 | 8.8% | $10,935 | 3.1% |
| 2019 | 740,231 | $9,444,076,129 | 19.7% | $12,758 | 16.7% |
| 2020 | 775,731 | $11,152,070,780 | 18.1% | $14,376 | 12.7% |
| 2021 | 830,700 | $13,198,659,432 | 18.4% | $15,889 | 10.5% |
| 2022* | 912,666 | $16,031,271,526 | 21.5% | $17,935 | 10.6% |
| 2023* | 1,040,000 | $18,000,000,000 | 12.3% | $17,308 | -1.5% |
| 2024* | 1,220,000 | $21,000,000,000 | 16.7% | $17,213 | -0.5% |