Soaring insurance rates and products
After nearly a decade of smart price cut, the insurer began prices increased sharply in spring 2001. These hikes were triggered by erodierende margins and a dramatic increase in requests and complaints related to asbestos and toxic mold. But all that pale beside the attacks of 11 September, insurers submitted their biggest challenge in decades. American companies, they should pay half the $ 70 billion deemed necessary for property and lost their lives in the tragedies of New York, Washington and Pennsylvania, industry $ 100 billion in value of assets is strongly threatened.
The attacks in order to lay the foundation for phenomenal rates higher almost across the board. “Before September 11 we went to see a gradual increase in prices. Since then, he had considerably, “says Damian Testa, president of Kaye Insurance Associates, a broker in New York. In addition, health insurance with an increase of 16% to 18% in 2002, after rising 12% in 2001. On the life insurance is the only line that does not see significant price increases.
No doubt, price increases are hard to insurance. Among the owners of housing in Manhattan for processors meat in Iowa, everyone is 100% to 300% the cost of materials and interruption of insurance policies, insurers hope, lead to a strong recovery in profits. “Significantly increase premium rates is expected that a positive effect on brokerage commissions and taxes,” said Patrick G. Ryan, CEO of insurance broker Aon Corp. (AOC) The facts: Two Aon expected return of growth and Thomson Financial / First Call expected that the increase in revenue of 221% damage in 2002. In comparison with a net decrease of 54% over the last year. The result of Managed Health Care companies should increase by 23%, compared to an increase of 8% over 2001, according to Standard & Poor’s.
The forecasts for prices and profits, however, are colored by insurance network security bill to a standstill, the Senate in December. The Parliament has invited the industry to swallow the first $ 10 billion in debt coming to terrorist acts and for the federal government to provide 90% of amounts exceeding that amount. The promise was hot cast a ballot on the reinsurance business - politics, that the primary responsibility to purchase airline risks unload some of their grandparents law. But now, given that Bill has coverage of terrorism is pending. Until Congress lively legislation, reinsurers are not write new terrorism. What is more, in the absence of a federalism is intended to cover, reinsurance prices on the terrorist attacks of coverage will probably jump by 50%. This should be Berkshire Hathaway’s General Re Corp. Even Chubb Corp. (CB) reinsurance small unit “will probably grow at a rate three,” said Chubb CEO Dean R. O’Hare.
Pending serious problems, forcing the insurance industry before 11 September have not disappeared. Complaints concerning product liability, negligence, discrimination and grew at an annual rate of 15% in the late 1990. Since 2000, asbestos-actions with a vengeance. At least eight other solutions medium-sized enterprises in bankruptcy protection in 2001 after the appointment in case of asbestos. Standard & Poor’s, the insurer will have figures on strengthening reserves for asbestos settlements of at least $ 30 billion.
Budget mold is also a costly problem. Thousands of requests and complaints related to toxic mold in Texas and California housing insurer could cost billions more. In May, a jury awarded Melinda Ballard and their families, $ 32 million for mold damage in their Dripping Springs (Tex.) at home. He decided that the Farmers Group Inc (FGRP) is not properly with Ballard initial request. Farmers Insurance has seen double Mold data on more than 8000 in 2001 and should be to increase its reserves in anticipation of more payouts in the future.
Also, some litanies of $ 2.5 billion in payments in connection with July’s Tropical Storm Allison, and it is clear that the insurer began the year with very small balances. Your investment portfolio with cushions shriveled the scholarship collapse, and the returns on their investments are declining liaison, as a result of the level of interest rates lower. Still, the barrier further disasters, through the middle, should be skyrocketing rates of rupture in a bleak weather.
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