Auto insurers may have seen a recent decrease in losses, but they will still need to increase their rates to keep ahead of inflationary loss costs, a financial analyst said.
In an analyst's note, Meyer Shields with Stifel Nicolaus said its review of rates, based on the Insurance Services Office statistics, finds that despite a drop in claims, as economically impacted policyholders drive less, loss costs are rising by less than 3 percent annually.
Mr. Shields said it seems clear that insurers are benefitting from the weak economic environment, which is reducing claim frequency by suppressing driving and also moderating overall severity as the costs of new and used cars (included in the calculation of many physical damage claims) decline. That implies underwriting profits will stay above the levels anticipated when current rates were determined.
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