in Ohio and US
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In 1998 (latest figures available for both Ohio and the US at close of publishing) claims accounted for $75 of every $100 earned in private passenger auto insurance in the US, the same as reported in 1997. In Ohio, claims accounted for $73 of every $100 earned in 1998, bettering the $78 reported in 1997. Auto premium dollar information for Ohio and the US are detailed on the chart below.
US expenses—commissions, state premium taxes, general expenses—accounted for 23% of the premium dollar in 1998 (the same as in 1997). Expenses in Ohio went up a percentage point between 1997 and 1998–from 22% to 23%.
US investments added $12 to income, compared to $11 in 1997, while Ohio’s investment gain was $13 in 1998, up from $12 in 1997. The bottom line worked out to $7 after-tax profit for every $100 in premiums in the US, the same figure reported in 1997. In Ohio, there was a $9 after-tax profit for every $100 in premiums in 1998 compared to $6 reported in 1997.
Of note, US lawyers’ fees accounted for $12 out of $100 (compared to $13 in 1997), with half going to plaintiffs’ attorneys and half to defendants’ attorneys. The $6 to plaintiffs’ attorneys is taken mainly out of the “pain and suffering and other noneconomic awards” category. Plaintiffs’ attorneys are typically paid on a contingency fee basis.
Claims fraud, including bogus medical bills and illegal chop shop operations, affects each part of the claim dollar. An Insurance Research Council study shows that 17–20% of every bodily injury claim dollar is due to outright fraud and claims padding.
The charts above show US premium dollar data in graphic form. The left hand chart shows where the revenue dollar (premiums and investment income) comes from, and the right hand chart shows where the revenue dollar goes in terms of claims, expenses and profits. Ohio charts depicting the same information are found below.
P/C insurance companies and self-insureds resolved more than $1 billion in intercompany claims disputes in 1999. A study by Tampa-based Arbitrations Forum, Inc. found that for every dollar a company spent on intercompany arbitration, the return was $18.92, which included the salary of the claims handler, file preparation, and copying and handling costs.
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