Filling out your March Madness brackets in the coming week might carry more risk than betting on the insurance industry right now. According to Chicago-based credit and information management firm
TransUnion's Insurance Risk Index for Q4 2010 stands at 99.13, which is three basis points lower than Q3 2010, and 18 basis points (or 0.2%) lower than Q4 2009. Developed as a risk barometer specifically for the insurance industry, the Insurance Risk Index is designed to show the relative expected loss ratio for market segments throughout the country.
Unlike previous quarters over the past two years when the vast majority of states experienced a decrease in the Insurance Risk Index, TransUnion says the results for Q4 2010 are mixed with half of the U.S. states experiencing an increase in their risk index.
The key ingredients in the Insurance Risk Index, TransUnion explains, are its insurance risk models, which are influenced by the length and stability of responsible credit performance. Benchmarked to the U.S. national average of 100 as of March 31, 2001, the Insurance Risk Index facilitates comparisons across geographies and demographic segments. For example, a state with an index of 110 is 10% riskier than a state with an index of 100.
"As we begin to see fluctuation of the Insurance Risk Index across a diverse geography, the stable and relatively low loss ratios insurance providers have experienced over the past several years may be coming to an end," says Geoff Hakel, group VP of TransUnion's insurance business unit.
"This may be an excellent time for insurers to re-examine their portfolios and prepare now to effectively mitigate any risks associated with higher replacement costs associated with damaged property and autos."
TransUnion also notes that Montana continues to rank as the riskiest state with an index of 109.03 followed by Washington (104.85), Mississippi (102.75), Arkansas (101.59) and Texas (101.48). States demonstrating the least risk from an insurance risk perspective continue to be Alaska (94.35), Minnesota (95.13), Massachusetts (95.41), Vermont (96.02) and Hawaii (96.09).
