Where The Auto Insurance Premium Dollar Goes 2001-2002

In 2002 claims accounted for $80 of every $100 earned in private passenger auto insurance in the US, down from $84 reported in 2001. US auto premium dollar information for 2001 and 2002 is detailed on the chart below.

US expenses—commissions, state premium taxes, general expenses—accounted for 24% of the premium dollar both years.

US investments added $6 to income in 2002, down from $8 in 2001. The bottom line equates to about $1 in aftertax profit for every $100 in premiums in the US in 2002. Despite the $8 investment gain in 2001, insurers realized no aftertax profit due to higher claims and expenses.

Of note, US lawyers’ fees accounted for $13 out of every $100 in premiums both years, split 50–50 between plaintiffs’ and defendants’ attorneys.

Theft continues to account for about 25% of all comprehensive claims.

The charts below show US premium dollar data for 2001 and 2002 in graphic form. The top charts show where the revenue dollar (premiums and investment income) comes from, and the lower charts show where the revenue dollar goes in terms of claims, expenses and profits.

Note: 2001 charts are based on every $100 of revenue plus investment income of $8, for a total of $108.
2002 charts are based on every $100 of revenue plus investment income of $6, for a total of $106.

Travelers Insurance Company issued the first auto insurance policy to Dr. Truman Martin of Buffalo 105 years ago. The $12.25 policy provided $500 in coverage. Martin was concerned about crashes between his car—one of only 4,000 in the entire country—and horses, which numbered about 20 million at the time. Today cars and trucks outnumber horses 221 million to just under 2 million. (InsuranceJournal.com, 2/2/04)