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MYTHBUSTER!

2004 Was the Most Profitable Year Ever for the Insurance Industry

Insurance industry profits are booming like never before.

• The property-casualty insurance industry’s after-tax net income for 2004 was the highest ever: a record-breaking $38.7 billion! 1
• Income in 2004 was up 29 percent from 2003, and comes on the heels of an earlier, astounding 997 percent increase from 2002 to 2003.2
• The property/casualty industry’s surplus also is at the highest level ever, rising 13.4 percent in 2004 to over $393 billion.3

Medical Malpractice will be profitable in 2006.

• According to a new study by the insurance industry consulting firm Conning Research and Consulting, entitled, Medical Malpractice: New Opportunities Emerging? Or the Eye of the Hurricane?, the medical malpractice line “will again be profitable in 2006.”

Health insurers’ profits (and their executives’ salaries) have also skyrocketed, as they raise premiums and limit reimbursement to doctors.

• “Despite a weak economy and soaring medical costs, U.S. health insurers have raked in earnings at a far greater pace than the rest of corporate America, with annual profits and margins doubling in the last four years.”4
• “Average pay for the five top executives at [the top] health insurers almost doubled [over the last four years] to $3 million a year.”5
• Health insurers raised premiums 59% during the same four-year period.6

While telling lawmakers that payouts to injured patients are costing insurers too much money, internally the insurance industry has been “celebrating” its rapidly rising profits.

• “The financial and underwriting performance of the property/casualty insurance industry during 2004 was the best in years.” — Dr. Robert P. Hartwig, Insurance Information Institute.7
• “The property/casualty industry can look forward to another year of underwriting profits… ‘Despite a softening market, we fully expect that the underwriting profits of 2004 will continue at least into 2005.’” — Conning Research and Consulting.8

Updated July 8, 2005

 

Notes

1Insurance Services Office, Inc. [ISO] & Property Casualty Insurers Assoc. of America [PCI], First Underwriting Profit Since 1978 and Investment Gains Propelled P/C Industry's Net Income and Surplus to Record Highs (April 12, 2005).

2ISO & PCI, Sharp Increase in P/C Industry’s Net Income Propels Surplus Upward in 2003 (April 2004).

3 ISO & PCI, supra note 1.

4 Russ Britt, “Health insurers getting bigger cut of medical dollars,” Investors’ Business Daily, Oct. 15, 2004.

5Ibid.

6 Kaiser Family Found. & Health Research and Educational Trust, Employer Health Benefits: 2004 Annual Survey 16 (2004).

7 Insurance Information Institute, 2004 – Year End Results.

8 Press Release, Conning Research and Consulting, Conning Research Predicts Property-Casualty Underwriting Profit Again in 2005 (May 10, 2005) (quoting Stephan Christiansen, director of research at Conning ).