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Reconstruction Man
124 Posts |
 Posted - 03/29/2004 : 12:37:55
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NEWS RELEASE
Jan 07, 2004
CONTACT: Doug Heller - 310-392-0522 x309
So-Called "Tort Reforms" Unnecessary, Lawmakers Should Focus on Rate Regulation
Santa Monica, CA -- The insurance industry registered a 320% increase in net income for the first nine months of 2003 as compared to 2002, according to a recent study by the Insurance Services Office (ISO) and the National Association of Independent Insurers. Throughout the year insurance companies have argued that they cannot be profitable unless lawmakers around the country limit the rights of consumers to file insurance claims. This new profit data proves that the industry can be wildly profitable without further limits on the legal rights of injured consumers.
"The insurance industry has told every lawmaker in the country that it cannot be profitable without restrictions on the legal rights of consumers, but this data showing a 320% increase in profit proves that the industry has been lying," said Douglas Heller, senior consumer advocate with the nonprofit, nonpartisan Foundation for Taxpayer and Consumer Rights (FTCR). "This information should put an end to all talk of so-called 'tort reform' and open up a new discussion about regulating insurance rates."
Consumer advocates have called on lawmakers around the country to implement a system of insurance rate regulation based on California's 1988 voter initiative known as Proposition 103. That law requires insurance companies to justify rates to the Insurance Commissioner prior to implementing any rate hikes. It also allows the public to participate in the ratemaking process and scrutinize insurance company books. The law has been a major success, with auto insurance rates, for example, declining over the past 15 years in the state, even as they've risen everywhere else in the nation.
According to FTCR, there are two primary reasons for the recent jump in profits nationwide: massive rate increases and an improved investment climate. Insurance rates, which have been increasing at an unprecedented clip in recent years, far outpaced the increase in overall claim- related costs, according to the study. Some of the most dramatic data were in the area of investments: the value of insurers investments swung dramatically in the industry's favor during 2003.
"The real story the insurance industry has faced recently has nothing to do with claims and lawsuits, but with investment income. The past few years have been very tough on anybody with investments, including insurers. But unlike most Americans, who had to tighten their belts during the economic downturn, insurance companies refused and instead tightened the noose around consumers to squeeze huge profits out of policyholders," said Heller.
http://www.consumerwatchdog.org/insurance/pr/pr003937.php3
Hmmm...
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fivedaily
USA
258 Posts |
Posted - 03/29/2004 : 13:57:41
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I would be surprised if the ISO actually intended this article to be used in this way. I wonder if the consumer group has turned the stastics around???
Jennifer |
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alanporco
USA
112 Posts |
Posted - 03/29/2004 : 16:27:00
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Mark Twain said: "There are lies, damned lies and statistics."
Reconstruction Man: What's your point? We're adjusters who follow the guidelines provided by the carriers. We don't set policy. Yes, that's right we're good little soldiers.
I'm happy to see that the industry may be returning to profitability. Maybe they'll tell us to pay for everything regardless of coverage. Maybe the fee schedules will increase. Maybe we'll all be deployed to handle ice damming claims in hell. Hmmm... |
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ALANJ
USA
159 Posts |
Posted - 03/29/2004 : 16:36:05
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| A little free information never hurt anyone. |
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KileAnderson
USA
875 Posts |
Posted - 03/29/2004 : 18:07:10
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| What is the actual dollar figure. If insurance companies made only $100 in profit in 2002 and in 2003 they made $420 in profit, that is hardly even worth noting, in fact it is bordering on loosing money but it is still a 320% increase in profits. Out of context, percentages mean nothing. |
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fivedaily
USA
258 Posts |
Posted - 03/29/2004 : 18:21:45
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To show what the ISO really said, let's go straight to the source:
http://www.iso.com/press_releases/2003/11_18_03.html
"ISO projects slowdown in growth from 9.2% this year to 6.1% next year; combined ratios of 102.9 in 2003 and 101 in 2004 also projected"
Anyone who has taken even a beginning insurance course knows that a combined ratio over 100 means the company is losing money.
And from the report the "consumer watchdog" references:
http://www.iso.com/press_releases/2003/12_19_03.html
"Yet even with the 320.6-percent increase in net income through nine-months 2003, the industry's income during the period was 22.8 percent below its income through nine-months 1997. "
And to see how our cat work affects the numbers:
Catastrophe losses more than doubled in nine-months 2003, increasing to $10.1 billion from $4.1 billion in nine-months 2002, according to ISO's Property Claim Services (PCS) unit. The $10.1 billion in catastrophe losses through nine-months 2003 compares with an average of $8.8 billion in catastrophe losses during the first nine months of the ten years from 1993 to 2002, and that ten-year average includes record losses from the terrorist attack on September 11, 2001."
Now we see in this quote, that just because the profits are up, it doesn't mean the company is "profitable."
"The combined ratio — a measure of losses and other underwriting expenses per dollar of premium — improved to 100.3 percent for the first nine months of this year, 4.7 percentage points better than the 105 percent a year ago."
Jennifer
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olderthendirt
USA
370 Posts |
Posted - 03/29/2004 : 19:33:42
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| Jennifer, a combined ratio of 102.9 means it's party time in the corporate offices. They have made big money as an industry. |
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KileAnderson
USA
875 Posts |
Posted - 03/29/2004 : 19:43:07
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| Only if the market is good. |
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glenn220
USA
10 Posts |
Posted - 03/29/2004 : 21:05:04
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| Actually, the quote, "There are three kinds of lies: lies, damned lies, and statistics”, is attributed to Benjamin Disraeli .... as credited by Mark Twain. :-) |
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Tom Toll
USA
154 Posts |
Posted - 03/29/2004 : 21:19:18
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| State Farm has to be profitable. Our rate on $105,000 in 2001 was 492, 2002, 619, 2003, 823, and 2004 1,128. I believe that is a +100% increase in two years. |
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ALANJ
USA
159 Posts |
Posted - 03/29/2004 : 22:41:02
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| My girlfriend is a broker and between this and Mr. Green she is going nutts!! |
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fivedaily
USA
258 Posts |
Posted - 03/30/2004 : 09:28:05
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Unless I misunderstand what I read in my AIC & CPCU books then I stand by my statement above regarding the combined ratio.
From http://insurance.cch.com/rupps/combined-ratio.htm
combined ratio
A formula used by insurance companies to relate premium income to claims, administration and dividend expenses. It is used in the annual statement filed by an insurer with the state insurance department. It is calculated by dividing the sum of incurred losses and expenses by earned premium. It indicates the profitability of the insurer's operations by combining the loss ratio with expense ratio (including dividends if any). Formula: (1) loss ratio + expense ratio + dividend ratio; or (2) (incurred losses + incurred underwriting expenses) ÷ earned premiums. This is termed the statutory combined ratio and measures the amount that an insurer must pay to cover claims and expenses per dollar of earned premium. The combined ratio does not take account of investment income. Examples: A ratio of .98 means the insurer has made two cents (2%) of underwriting profit; a ratio of 1.17 means it has an underwriting loss of 17 cents (17%) for each premium dollar.
If I am wrong then PM me with verification and I will edit and/or delete my posts.
Jennifer
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Gale
USA
231 Posts |
Posted - 03/30/2004 : 09:55:43
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Jennifer your understanding is my understanding as well. From what I am hearing from veterans is that when the stock market, etc was providing 30-40% returns on investments the ratios were not closely watched by some carriers especially the large ones but they were not the only industry that was not concerned about business profits in the same time frame. There are still many carriers that work hard year over year to stay in the lower 90's. These have not been so directly impacted by the lower investment returns of the past few years but all carriers are now reviewing all expenses today as well as ways to cut required expenses.
Tom’s illustration points out the change in premium many of us have seen but does not indicate profitability in and of it self. This is a personal opinion but I think the big thing 9/11 drove home was the “house” does not always win the big bets. “Earning” profits can be a chore, as many of us know.
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KileAnderson
USA
875 Posts |
Posted - 03/30/2004 : 11:17:19
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| Jennifer, you are correct that if the ratio is above 100 then there is an UNDERWRITING loss. But companies don't just keep their money in a shoe box under the bed and pull it out every time they need to pay a claim. They invest the money so if they have a return on investment of 12% and a combined ratio of 102 for the year then they still made a 10% gross profit even with a 2% underwriting loss. |
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fivedaily
USA
258 Posts |
Posted - 03/30/2004 : 11:56:35
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Okay, so what is wrong with publicly held companies (or privately held ones for that matter) making a profit? Even a 10% profit??? Don't roofer's ask for at least that much with 10 & 10?
Kile, thanks for pointing out the distinction that investment income is not included in the combined ratio.
What is Recon Man's purpose here? Has he not grasped that we are at the end of the line when it comes to these matters? We write estimates and pay customers what the contract requires to restore their homes. If we are good, we also provide peace of mind to them at the same time. I really wonder why he is really here posting all of these negative articles about insurance companies.
Jennifer |
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LarryW
USA
126 Posts |
Posted - 03/30/2004 : 12:11:08
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Another thread was just locked with the folowing post
"Posted - 03/30/2004 : 11:58:47
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This thread has no relation to its forum, "Claims Handling." I am locking it. To ReconstructionMan, if you wish to have this thread moved, please let me know which, more appropriate forum, you would like it in. But, as this has nothing to do with what adjusters do on a day to day basis it is not welcome in the "Claims Handling" forum.
Jennifer, moderator"
My question is: what does this thread have to do with what adjusters do on a day to day basis?
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Larry Wright |
Edited by - LarryW on 03/30/2004 12:13:45 |
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Insurance Industry Profits Skyrocket 320%
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