USAToday has an article today about the increases in auto, life and home insurance premiums, brought on by loss of insurance company investment returns. Normally, when there is a downturn in the stock market and insurance companies bring in less revenue, they start talking about tort reform, and blaming their decrease in profits on trial lawyers. I guess this time everyone knows the real reason why they're not making as much money, so maybe we won't have another big tort reform push from the carriers. Here are excerpts from the article:
The cost of a typical auto insurance policy will
rise 4% to $875 this year, on top of a 3% increase last year, according
to the Insurance Information Institute, a trade group. Consumers also
will pay more for homeowners insurance: The average policy will jump 3%
to $841. And term life insurance rates are rising after several years
of declines.
The price increases come as consumers struggle —
the unemployment rate has reached 8.5%, and household wealth has
plunged with investment portfolios and home prices.
In this economy, "Anything that costs more is
difficult for consumers," says J. Robert Hunter, director of insurance
for the Consumer Federation of America.
The industry's profits come from insurance
policies and investment returns, says Terri Vaughan, chief executive of
the National Association of Insurance Commissioners. That's why, "If
your expectations for future investment income are lower, that's going
to affect premiums."
As the economy weakens, insurance rates could
climb further. Insurers "cannot assume that interest rates will be much
higher and stock returns much better in the foreseeable future," says
Robert Hartwig, president of the Insurance Information Institute.
In the life insurance industry, weak profits,
higher reserve requirements and increased capital costs are reversing a
more than decade-long trend of falling term life prices, says Byron
Udell, chief executive of AccuQuote, an online insurance broker.
Udell predicts average term life rates will be
5% to 10% higher at this time next year. Banner Life Insurance raised
rates this year, he says. Prudential and ING have notified AccuQuote
they'll raise rates in coming weeks.
significant because these three insurers are major players that
frequently offer lower premiums than their competitors, Udell says.
The specific differences from last year’s $0.44 a share starting with the callout from the fourth quarter earnings call are as follows. The holiday shift, which is largely an Easter event, occurring this year in quarter two when last year’s heavy shopping occurred in quarter one shifts about $0.04 a share. So that… it takes it away from this year’s first quarter, but, as you can appreciate, it puts it into this year’s second quarter. So that’s merely a shift. And as I think many of you know, we stand alone among the publicly traded supermarkets in how our quarters are designed. So we always get this shift and nobody else really does. But it’s really just a shift from one quarter to the next.
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