2003 Joint Industry Forum
INSURANCE LEADERS EXPECT IMPROVEMENT IN PROFITABILITY OF P/C INSURANCE INDUSTRY FOR 2003
NEW YORK, Jan. 14, 2003 -- Leaders of the property/casualty insurance industry expect an improvement in profitability for 2003 compared with last year, according to a survey conducted by the Insurance Information Institute (I.I.I.) at its seventh annual Property/Casualty Insurance Joint Industry Forum, held here.
Executives in the property/casualty industry are optimistic that their industry is on the road to recovery. Seventy-five percent of survey respondents expect 2003 to be more profitable than last year, as measured by the combined ratio, a percentage of each premium dollar a property/casualty insurer spends on claims and expenses. The combined ratio for 2002 is estimated at 103.3.
Asked if insurers thought the hardening of the p/c commercial market would continue through 2003, 81 percent thought it would. Ninety-two percent also thought the hardening of the personal lines market would continue through 2003.
Broken down by lines of insurance, 70 percent of respondents expect auto insurance to be more profitable in 2003, most likely as a result of improved adequacy of rates.
Sixty-five percent of respondents predict the homeowners line to be more profitable than last year, despite the fact that only 38 percent believe that the mold crisis has peaked and that the pace of mold claims will decline.
Abuse of the tort system is a major concern confronting property/casualty insurers. According to Robert Hartwig, senior vice president and chief economist of the I.I.I., tort costs currently consume two percent of GDP or more than $200 billion per year. “The current medical malpractice crisis epitomizes the problems in the U.S. tort system. Medical malpractice tort costs rose by 140 percent between 1990 and 2000, more than double overall growth in healthcare inflation over the same period.”
Businesses in every industry are crying out for tort reform. Yet only 23 percent of survey respondents think Congress will pass and President Bush will sign meaningful tort reform legislation in 2003. Likewise, just 20 percent expect Congress to pass and President Bush to sign legislation in 2003 that will help contain the current asbestos crisis.
Eighty-nine percent of respondents thought there would be an improvement in the workers compensation market, yet only 12 percent expect an overall improvement in
“The current hard market was already well under way before September 11, and is likely to continue in 2004,” said Hartwig. “Rates of return in the property/casualty insurance industry, while improving, are still only in the four to five percent range, well below the 10 to 15 percent typical of Fortune 500 companies.
Following the passage of the Terrorism Risk insurance Act of 2002, 75 percent of survey respondents believe that it will be easier for businesses to obtain terrorism insurance coverage.
The Property/Casualty Insurance Joint Industry Forum was created to provide leaders from the widest spectrum of the industry with an opportunity to meet with each other in discussion of topics of general interest.
Forum participants included nearly 250 representatives from property and casualty insurance and reinsurance companies and organizations. Of these, roughly 40 percent responded to the survey.