Conning Forecasts Rise in Premium Rates Across All P/C Lines; Consumers Can Expect to Pay More for Auto and Homeowners Insurance

    HARTFORD, Conn.--April 26, 2001--Conning believes that consumers can expect an increase in auto insurance premiums next year, reversing a trend in declining auto insurance rates that began in 1995.
    According to a recent Conning & Company study, personal automobile rates are increasing 4%-8%, but recent filings may result in increases of 16% or higher in some areas, especially for non-standard automobile coverages. Homeowner insurance premiums also are expected to increase by 6.9% in 2002. Despite the rise in premiums across all property-casualty lines, competition, escalating losses, increased expenses and a slowing economy will continue to challenge insurers' ability to achieve profitability.
    According to the study, "Property-Casualty Forecast and Analysis," inflation in medical services costs rose faster than the overall consumer-price-index (CPI) over the past couple of years, pushing losses upwards in virtually all casualty lines. The change in the CPI increased from 1.6% in 1998 to 3.4% in 2000. However, over the same period, the change in the CPI for hospital and related medical services rose from 3.1% to 6.2%, and increased a full point in January 2001 alone.
    Other industry-wide pressures on the property-casualty sector include a hardening reinsurance market and increasing jury settlements in liability lines.
    The Conning study reports on all property/casualty lines which include: personal auto, homeowners/farmowners, commercial auto, workers compensation, commercial multiperil, general liability, medical malpractice, fire and allied lines, and inland marine.
    For personal auto insurance, Conning suggests that the push to sell policies online may have contributed to an increase in loss ratios through poor classification of risk exposures. The Internet and the intense desire to land online sales has made it easier for consumers to provide inaccurate key rating characteristics in order to secure lower and, consequently, inadequately priced insurance.
    Auto physical damage insurance premiums should continue to rise due to consumers' preference for trucks and sport utility vehicles. Also, the cost of repairing physical damages has soared, in part, due to the increase in the use of original equipment manufacturers rather than after-market parts.
    "Insurers are facing a great deal of uncertainty," said Clint Harris, a vice president at Conning & Company and author of the study. "Until medical cost inflation and increased losses due to litigation can be brought under control, insurers will have a difficult time increasing premiums enough to overcome skyrocketing losses."
    In addition to higher repair costs, homeowner premiums will have to increase in order to offset the rising reinsurance costs associated with catastrophes. Despite a relatively quiet 2000 in insured catastrophic losses, reinsurers are requiring higher premiums to make up for inadequately priced catastrophe losses both inside and outside of the U.S. Also, many home insurers will need to raise their coverage limits, and therefore premiums, for those policyholders who have made significant home-improvements which have increased the value of their homes. These increases are necessary to correct shrinking insurance-to-value ratios.
    For all property-casualty lines combined, Conning projects a marginal improvement in the combined ratios for 2001 and 2002. Commercial lines are more likely to see greater improvement sooner than are personal lines.
    The Conning study, "Property-Casualty Forecast and Analysis" is available from Conning & Company for $575 by calling toll free (888) 707-1177 or (860) 520-1245. A complete listing of all Conning Strategic Studies can also be found by visiting the company's website at www.conning.com.

    About Conning & Company

    Conning Corporation, through its subsidiaries, provides asset management services to insurance companies and institutional investors, manages private equity funds investing in financial services companies, and conducts in-depth research on the financial services industry. Conning & Company (member NASD/SIPC) is located at CityPlace II, 185 Asylum Street, Hartford, CT 06103.