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Insurers Boost Claims Capacity, Lower Rates

Insurers took advantage of last year's respite from above-average hurricane activity to set aside billions of dollars to bolster the industry's claims-paying capacity, according to...
January 9, 2007

Insurers took advantage of last year's respite from above-average hurricane activity to set aside billions of dollars to bolster the industry's claims-paying capacity, according to the Insurance Information Institute (I.I.I.).  At the same time, insurers are lowering rates for most drivers, many homeowners and a wide variety of businesses.  The I.I.I. estimates property/casualty insurers boosted by $55.7 billion their cumulative claims paying resources in 2006, a number equal to 93 percent of the $59.8 billion in expected net income (profits).  The $55.7 billion figure was a near record, second only to the $62 billion increase in 2003 as insurers worked to recover from the September 11, 2001 terrorist attacks. 

"Insurers directed a significant share of their 2006 profits and investments back into the business," said Robert Hartwig, president and chief economist of the Insurance Information Institute.  Hartwig added that excellent underwriting results, the substantial drop in catastrophe losses and strong investment performance enabled insurers to reinvest billions of dollars in 2006, allowing claims-paying resources to reach an all-time record high estimated at $481.5 billion.

Premium prices are continuing their downward trend, capping a year in which they showed little sign of increasing, according to a report issued by MarketScout, an online insurance exchange. Based on its figures, premium rates dropped 8 percent in December, only one point off from November's 9 percent drop, the lowest of 2006. Looking at the year, premiums dropped an average of 6.6 percent in 2006.

The I.I.I. report was criticized by J. Robert Hunter, insurance director of the Consumer Federation of America (CFA). In response to Hartwig's comments, Hunter asserted that insurance is "not a high risk business."

"Insurance is a lower risk than a mutual fund," Hunter said, in remarks to the St. Petersburg (FL) Times. "It's not a high risk business. They like to talk about terrorism and hurricanes and living on the edge, but it's a myth."

Insurers Boost Claims-Paying Capacity as Premium Rates Drop (I.I.I. 1/7/07)
 
What's the Insurance Truth? (St. Petersburg (FL) Times 1/6/07)

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