Date: Fri 17-Jul-1998

Publication: Bee

Author: CURT

Quick Words:

car-insurance-rates-business

Full Text:

Study: Insurers Making Big Profits From Connecticut Auto Insurance

HARTFORD (AP) -- Connecticut drivers should be paying up to 15 percent less

for automobile insurance because companies are making big profits, according

to a study released last week.

"High rates have hurt all drivers -- urban and suburban -- helping only to

swell industry profits," said Richard Blumenthal, Connecticut's attorney

general, who commissioned the study.

Conducted by an insurance industry expert, the study analyzed companies'

profit margins and how much they have paid out in claims since 1996. The study

recommends a 5.9 percent to 15 percent reduction in rates.

The study also recommends that insurance premiums focus on a driver's record

rather than where a driver lives. City dwellers pay more for insurance than

similar drivers who live in the suburbs.

"The high urban auto insurance rates are particularly punishing when it is

considered that the cities have higher concentrations of poor than do other,

less urban municipalities," the study said.

Connecticut motorists pay an average of $899 a year for insurance, the

fifth-highest rate in the nation. At the same time, motorists in Bridgeport,

Hartford and New Haven pay an average of about $1,100 a year.

Blumenthal said he commissioned the study because of complaints from consumers

and mayors of several large cities about high rates.

"The rates should be lowered because Connecticut drivers have been helping the

companies, which are making big bucks nationally, to even larger profit

margins in this state," said J. Robert Hunter, a former Texas insurance

commissioner who conducted the study. Hunter, a consumer advocate, is now

director of insurance for the Consumer Federation of America.

In 1996, companies offering private passenger auto insurance in Connecticut

posted profits of 17 percent, compared to the nationwide average of 12.1

percent. A year later, profits rose to 21.5 percent, Hunter said. The target

profit margin for the companies is 15 percent at most, and a 5.9 percent rate

reduction would bring profit back into that range, he said.

Hunter said one of the reasons companies are making large profits is the aging

population of baby-boomers, which results in safer driving and fewer

accidents. Also, better brakes, air bags and safer cars have cut down

injuries.

Insurance companies also are better at detecting fraud and are cashing in on

the stock market, using premiums to invest and reap the benefits of the

booming economy, he said.

Safer driving and better technology have led companies to pay less and less in

claims compared to their premiums. In 1997, the top 10 insurance groups in

Connecticut paid out 55.7 percent of their premiums, compared to 62.8 percent

paid out across the country.

Hunter recommended state officials hold hearings about insurance rates to ask

companies how they set rates. Also, city residents should be offered the

chance to pool their buying power to find lower, group rates.

George Reider Jr., Connecticut's insurance commissioner, said companies

already have taken part in public forums. Also, he said, the state has

published a brochure that compares rates which have, on average, fallen by 2.8

percent.

Reider said 63 more companies are selling auto insurance in the state than

three years ago.

"It's never been more competitive in the state's history, in my opinion," he

said. "In this market [consumers] can save money. We've done everything in our

power to try to encourage people in that regard."