Delaware Auto Insurers Losing Money: PCI

NU Online News service, April 6, 4:15 p.m.EDT?An insurance trade group said its study has found thatcostly injury claims in Delaware are making it an unprofitablelocation for auto insurers.[@@]

The Property Casualty Insurers Association of America (PCI)based in Des Plaines, Ill. said even after investment income isconsidered, underwriting private passenger automobile insurance inDelaware has been unprofitable for the past five years,

PCI said Delaware consumers pay among the highest average autoinsurance premiums in the nation ?due to the fact that an averagebodily injury and personal injury protection (PIP) claim inDelaware is more than 50 percent higher than the average cost ofsuch claims in neighboring states.

According to PCI, consistently high claims costs, combined with"a burdensome regulatory environment that restricts insurers'ability to adjust prices or consider effective factors tounderwrite and rate policies, are forcing many insurers to thinktwice before doing business in Delaware or expanding theiroperations in the state. This, in turn, reduces competition andconsumer choice in the marketplace."

"Clearly, the Delaware auto insurance market is not attractiveto insurers right now," said Richard Stokes, regional manager ofthe Property Casualty Insurers Association of America (PCI), atrade group of insurance companies that underwrite the nearly 40percent of the nation's auto insurance policies.

Mr. Stokes said Delaware's state legislature can create a morecompetitive market place by enacting laws that allow insurers moreflexibility to price their products.

He suggested that lawmakers could play an important role byrejecting efforts to unfairly restrict insurers from using proveneffective underwriting factors, such as credit history, to offerlower auto insurance rates to the majority of their customers.

The PCI study found that insurers paid out $105.30 in claims forevery $100 of premiums in 2003, significantly higher than inPennsylvania, Maryland and Virginia. These losses, PCI said, areoccurring even though Delaware's average statewide auto premium ishigher than in any of the neighboring states -- $907, compared with$625 in Virginia and $837 in Maryland.

Delaware, PCI said, has from 100 to 200 fewer auto insurancewriters than neighboring states like Maryland, Virginia andPennsylvania. In 2003, the state had 278 insurers compared with 381in Maryland, 470 in Pennsylvania and 413 in Virginia.

When considering pre-tax operating profit, in which investmentincome is added to underwriting results, insurers turned a profitin Maryland and Virginia, but lost money in Delaware, according tothe PCI study.

Delaware's comparatively small size was found not to be a factorin the profitability issue. PCI compared the number of insurerswriting in the 15 states with under $1 million in private passengerauto premium. Although Delaware has the sixth most writers, ittrails behind Nebraska, Idaho, New Mexico and Montana ? none ofwhich have any major metropolitan areas, PCI said.

In 2002, the average auto insurance premium in Delaware was theninth most expensive of any state according to the NationalAssociation of Insurance Commissioners (NAIC).

A steady decline of insurers writing auto coverage could changethat, Mr. Stokes warned. "Insurers facing ongoing losses of thismagnitude will carefully consider whether they can afford to stayin Delaware," he said. "And losing insurers will eventually hurtconsumers with higher premiums and lack of coverage."

A copy of the "Delaware Private Passenger AutomobileProfitability" survey is available from Laura Mazzuca Toops at847-553-3714, or [email protected].

PCI is composed of more than 1,000 member companies.