Auto Insurers’ Profits Soar as Claim Costs Fall
The New York Times reported yesterday that auto insurance companies are raising premiums in New York City despite paying out less in claims. According to a report released by the city comptroller, state regulators have not "adequately policed the industry." In New York, the fees for auto insurance are regulated under the theory that auto insurance is mandatory.
The private passenger auto insurance loss ratio — the percentage of each premium dollar that goes to pay claims — fell to 48.4 percent in 2005 from 78.3 percent in 2000. From a business standpoint, this is a remarkable reversal of fortune: 30% higher margins. The report concludes that regulators should reduce total auto insurance premiums statewide by $1.5 billion a year.
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Ron:
I remember when I used to work as in-house counsel for a certain insurer they consistently experienced profits realized somewhere in the low 20% range. As employees, we were entitled to "profit sharing" which meant a yearly check which was calculated based on your salary X the percentage of profit realized that year. You can imagine how this would serve as incentive for insurance folks to minimize claims made by injured victims of negligence and to protect the "house". Fortunately, I did not stick around long enough to truly "realize" these ill gotten gains which I characterize as "blood money" and instead answered the calling to assist those injured at the hands of negligence. I am fairly sure that most insurers offer similar programs to their employees.
Posted by: Gabriel A. Riveros, Attorney | December 1, 2006 8:19 PM
I think they do, Gabe. My wife was in-house counsel for Nationwide in a different life. Same basic idea.
Posted by: Ron Miller | December 4, 2006 12:39 PM