Leaders of the property and casualty insurance industry expect that the investigations into certain industry practices by state attorneys general and insurance departments will continue to expand in 2005, according to a survey conducted by the Insurance Information Institute.
Of the executives polled at the annual Property/Casualty Insurance Joint Industry Forum, 92 percent are convinced that investigations will expand. Despite further probes, 67 percent thought that most companies would be able to settle charges against them this year.
Insurance leaders were divided as to whether the industry's financial performance would continue to improve in the year ahead. Among the survey respondents, 57 percent expect 2005 to be more profitable than last year, as measured by the combined ratio, a percentage of each premium dollar spent on claims and expenses. The combined ratio for 2004 is estimated at 97.
When asked whether the p/c commercial market would soften significantly this year, 53 percent thought that it would not, while 63 percent thought that the personal lines market would not soften. Broken down by lines of insurance, 55 percent do not expect auto insurance to be more profitable, 53 percent predict that homeowners will be more profitable, and 96 percent expect interest rates to rise in 2005.
Businesses in every industry are seeking tort reform. Although insurers are cautiously optimistic on that front, with 51 percent expecting Congress to pass meaningful class action reform legislation in 2005, they remain pessimistic about workers' compensation. More than three-fourths predicted that there would be no improvement in the workers' compensation market. In commercial lines (excluding workers' compensation), 60 percent expect no overall improvement, yet 65 percent felt that commercial insurers are still disciplined in their underwriting.
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