A recovering economy means a declining risk profile for the insurance industry.
The Insurance Risk Index from TransUnion fell to 99.18 for Q1 2010—the third straight quarterly decline. The Insurance Risk Index is designed to show the relative expected loss ratio for market segments throughout the country, and is benchmarked to the U.S. national average of 100.
"This third quarterly decline in the Insurance Risk Index is a clear signal that consumer insurance risk associated with automobiles and housing, as reflected in the manner consumers responsibly manage and repay their credit obligations, will soon return to pre-recession levels," Chet Wiermanski, TransUnion's global chief scientist, said in a statement. "As the economy continues to improve, especially within the employment sector, consumers should have more room in their wallets to repay their existing credit obligations.
The index revealed a great deal of variability between states. Montana (109.11), Washington (105.16) and Mississippi (102.76) came in as the riskiest states, while Alaska (94.64), Minnesota (95.19), Massachusetts (95.27) and Hawaii (95.64) present the least risk from an insurer’s perspective. Yet the overall trend is improving, Wiermanski noted. "With 49 states showing a decline in the Insurance Risk Index, the prospect of an economic recovery taking place throughout the country is very encouraging," he said.
Geoff Hakel, group VP for TransUnion's Insurance business unit, said this trend will benefit both insurers and consumers. "The continued decline in the Insurance Index confirms what we have been expecting for the past six months, and is encouraging news for the industry and consumers. As risk levels continue to decrease, this trend should eventually be factored in the portfolios of insurance carriers, reflecting lower costs for consumers."
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