A joint report issued by three major industry organizations notes that net losses and loss adjustment expenses increased significantly in 2007.

The report, issued by ISO, the Insurance Information Institute (I.I.I.), and the Property Casualty Insurers Association of America (PCI), noted that overall net loss and loss adjustment expenses in 2007 increased more than five percent when compared to results found in 2006, going up from $283.8 billion to $298.6 billion. That comes out to an increase of almost $15 billion.

Those results are particularly distressing because the scope and severity of catastrophes in 2007 were much lower than in 2006. Including additional development of losses from the catastrophic hurricanes of 2005, ISO estimates that the net catastrophe losses included in insurers' financial results fell to $6.9 billion in 2007 from $11.8 billion in 2006. So why the increase in adjustment expenses?

Fast Track data compiled by ISO, the PCI, and other statistical agents indicated that continuing increases in claim severity contributed to the growth in overall loss and loss adjustment expenses, at least for the personal lines. For example, the report states that private passenger auto liability bodily injury paid-claim severity rose six percent in 2007, and homeowners' paid-claim severity [excluding catastrophe losses] jumped 9.8 percent.

But the Fast Track data also shows that, for some lines and coverages, previously favorable frequency trends have become unfavorable. In particular, private passenger auto liability property damage paid-claim frequency rose 0.6 percent in 2007. Private passenger auto collision paid-claim frequency also increased to the tune of 2.3 percent, while homeowners' paid-claim frequency climbed 3.2 percent.

The complete statistical breakdown can be found here.

Interested in more risk management news and in-depth articles? Head over to Claims' risk management channel for more information.

Special Reports /

Catastrophes Down, Adjustment Expenses Up?

Related Stories

Recommended For You