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Where The Auto Insurance Premium Dollar Goes 2003–2004

In 2004 claims accounted for $66 of every $100 earned in private passenger auto insurance in the US, down from $76 reported in 2003. US auto premium dollar information for 2003-04 is detailed in Table 1.

US expenses—commissions, state premium taxes, general expenses—accounted for 22% of the premium dollar in 2004 compared 23% in 2003.

US investments added $7 to income in both 2003 and 2004.  The bottom line equates to about $11 in aftertax profit for every $100 in premiums in the US in 2004, an increase over the $7 aftertax profit realized in 2003.

Of note, US lawyers’ fees accounted for $12 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 or 2% of premiums earned for private passenger auto insurance.

Table 2 shows where the revenue dollar goes for US private passenger auto insurance for 2003 and 2004 in graphic form in terms of claims, expenses and profits.

¹ Includes theft and damage to other property such as signs
² Also known as “other than collision”
³ Includes interest, dividends and realized capital gains

Source: Insurance Information Institute estimate based on data from ISO; NAIC Annual Statement Database, via National Underwriter Insurance Data Services/Highline Data; Insurance Research Council; A.M. Best Company, Inc.

The 2006 models of the Cadillac STS and Lincoln Town Car Signature cost more than twice as much to own and operate annually than the Honda Civic and Toyota Corolla, according to a September 2005 analysis by Runzheimer International. The study of selected 2006 models included 18 cars and 12 light trucks, vans and SUVs. Both the Cadillac and Lincoln Town Car sedans have a total annual cost of more than $17,500. Other vehicles with annual costs exceeding $12,500 include the Mercury Grand Marquis GS, Ford Crown Victoria LX, Chrysler 300 C and Lexus LS 430. Cars with annual costs less than $8,500 include the Toyota Corolla and Honda Civic.