"The initial premise of the study is that the property-casualty insurance industry has underperformed other industries financially for years with a lower return on equity, lower price to earning ratio and greater volatility," said Bruce Hale, a Conning research analyst and author of the report.

"All three of those things," said Mr. Hale, "are less desirable in the eyes of investors and senior executives at insurance companies."

He said the question carriers face is "how might the insurance industry boost its return on equity? From there we did an analysis that expenses are fertile ground to do that."

Conning used nontraditional items to examine expense performance, said Mr. Hale. The accepted comparison is expenses to written premium. Conning compared other items such as underwriting expense ratio to the loss adjustment expense ratio, where the industry saw no improvement. It also examines the question over a long term.

An example of this examination was in personal auto, Mr. Hale explained. The study looked at expenses divided by the number of households that own at least one vehicle. When adding together commission expense with acquisition expense, plus general expenses, and factoring out inflation, overall expenses for insurers have risen more than 44 percent. In hard dollars, the expense rose from $118 in 1982 to $167 in 2002.

"From that standpoint, you can say that there has been an overall deterioration in that nontraditional expense ratio despite all the advances in automation and despite the economy of scales from there being a lot more households and vehicles," he observed.

The report examines in detail five insurance lines: personal automobile, homeowners, commercial multiperil, commercial automobile, and workers' compensation.

Figures used in the report were from A.M. Best, government sources and other financial reports for industry comparisons.

While not commenting directly on the report, Joseph Annotti, vice president for public affairs for Des Plaines, Ill.-based Property Casualty Insurers Association of America, said that insurers are working to improve their efficiency.

"A competitive market demands efficiency, and insurers are constantly seeking ways to reduce their expense ratios and increase customer satisfaction," said Mr. Annotti.

He said the biggest obstacle to driving down such costs "is a burdensome and inefficient regulatory system that in many states forces insurers to go through a complex and expensive process every time they want to adjust a rate or form.

"The current regulatory system must be overhauled so that markets are driven by competition, not bureaucratic red tape. Such regulatory reforms would dramatically reduce insurer expenses, provide consumers a greater choice of companies and products, and spur price competition."

The study also details how executives can perform their own analysis and improve their efficiency ratio.

This process includes identifying the correct figures for analysis of expenses; making certain that the cuts do not increase expenses in other operations; allocating overall expenses in proportion to the amount of work performed within an expense group; and making sure that increasing efficiency in one area does not lose efficiency somewhere else.

Mr. Hale further recommended that the analysis should include all key senior executives in the company.

The 163-page study can be obtained by calling (888) 707-1177 or through the Internet at www.conningresearch.com.