More on How 2005 Was the Most Profitable Year Ever for the Insurance Industry
The usual narrative of tort “reformers” is that our insurance premiums are increasingly high because of a flood of frivolous lawsuits. As has been said before on Tort Deform, this explanation does not explain the reality of the insurance industry. (2005 Was the Most Profitable Year Ever for the Insurance Industry and nyceve's posts)
Recent news drives this point home even further. It seems increasingly clear that at least a large part of why our insurance premiums cost so much, is simply because the insurance industry is making so much money.
Perhaps if insurance company profits were not as high as they have been, our premiums would not be as high as they have been (Who profits?). Case in point, a recent New York Times article describes the enormous profits made by the insurance industry.
Here are the highlights of the piece:
(link to full article)
Insurance companies are expecting record profits in 2006 after predictions of another year of devastating hurricanes have so far come to naught.
Industry experts are estimating that profits may reach $60 billion, on a combination of higher premiums along the coasts, no major payouts for natural disasters and strong investment returns. The insurers also had high profits on other lines of coverage like auto insurance, workers compensation and general liability.
The record profits expected this year come after a terrible 2005, when insurers paid out $61 billion for damage from Hurricane Katrina and other storms. Even so, the insurers ended up with a profit of $43 billion for the year because of exceptionally good results on investments, declining claims on policies on homes away from the coast and profits on other lines of coverage.
The expected record profit this year will add momentum to a decades-long earnings streak, interrupted by only one annual loss — $7 billion in 2001, when the Sept. 11 attacks staggered the insurers.