NU Online News Service, Feb. 21, 1:05 p.m. EST
Premium increases on homeowners insurance may be slowing while personal auto continues steady gains, according to a government survey.
According to figures released by the U.S. Department of Labor, the Consumer Price Index over the past few months indicates that personal auto has seen steady premium increases averaging well over 4 percent.
According to figures furnished by the Insurance Information Institute, the CPI indicates that for 2010, motor vehicle insurance increased by 5 percent. In December of last year, the increase stood at 4.4 percent, and in January it was 4.5 percent.
Tenants and household insurance, on the other hand, rose 3.5 percent for 2010 but dropped to a 1.9 percent increase in December and 1.5 percent in January.
According to Meyer Shields, a financial analyst for Stifel Nicolaus, auto premiums have been rising much faster than loss costs for about the last 24 months.
"We think personal auto pricing discipline will rate growth above loss cost inflation [a positive for underwriting improvement]," he wrote.
However, a slowdown in homeowners increases creates "less underwriting cushion."
Some trends that are impacting pricing on auto include an increase in the purchase of new cars and trucks. Sales of automobiles show year-over-year positive growth from December 2009 to January 2011, Mr. Shields noted. As newer, more expensive vehicles replace older ones, "insurance trends upward," he said.
Additionally, poor underwriting returns in private passenger auto at State Farm translate into the nation's largest carrier raising rates, which means competitors will do the same, Mr. Shields added.
Any increases by State Farm could benefit Allstate, Progressive and GEICO, as consumers search for less expensive policies, he suggested.
The CPI indicates an increase of 1.6 percent over the past 12 months and increase of 0.4 percent for the month of January.
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