Where The Auto Insurance Premium Dollar Goes In Ohio And US

In 2000 claims accounted for $83 of every $100 earned in private passenger auto insurance in the US, up nearly 11% from $75 as reported in 1998. In Ohio, claims accounted for $77 of every $100 earned in 2000, an increase from the $73 reported in 1998. Auto premium dollar information for Ohio and the US are detailed below.

Source: Estimated by the Insurance Information Institute (III), based on data from A.M. Best Co., Insurance Services Office, Inc., National Association of Insurance Commissioners and Insurance Research Council

US expenses—commissions, state premium taxes, general expenses—accounted for 24% of the premium dollar in 2000 (1% increase from 1998). Expenses in Ohio increased between 1998 and 2000, from 23% to 25%.

US investments added $10 to income, compared to $12 in 1998, while Ohio’s investment gain was $12 in 2000, also down from $13 in 1998. The bottom line worked out to less than $1 in after-tax profit for every $100 in premiums in the US, significantly down from the $7 figure reported in 1998. In Ohio, there was a $4 after-tax profit for every $100 in premiums in 2000 compared to $9 reported in 1998.

Of note, US lawyers’ fees continue to account for $12 out of every $100 in premiums, 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.

Theft continues to account for about 25% of all comprehensive claims.

The charts below show US premium dollar data for 2000 in graphic form. The left chart shows where the revenue dollar (premiums and investment income) comes from, and the right chart shows where the revenue dollar goes in terms of claims, expenses and profits. Ohio charts depicting the same information are found below.

Note: These charts are based on every $100 of revenue plus investment income of $12, for a total of $112.

A Jury Verdict Research report released in January 2001 found that juries were more likely to award million-dollar settlements in certain large and small states than in most others. Between 1993–99, 25% of jury verdicts in New York State were for $1 million or more (the highest proportion). The other states with a high proportion of verdicts of $1 million or more are (in descending order) NM, ID, MS, NV, PA, AK, MA, AL, IL and CA. (The National Law Journal, 2/12/01)

Note: These charts are based on every $100 of revenue plus investment income of $13, for a total of $113.

According to the US Bureau of Transportation Statistics, there are about 4 million miles of public roads in the US. This equates to circling the globe more than 157 times or more than 8 round-trips to the moon. (USA Today, 1/26–28/01)