Auto insurance risk shows slight increase after a series of quarterly declines


TransUnion’s Index for Auto Insurance Risk showed a marginal increase of about 0.03% by the end of September 2011. After having experienced a series of declines in the last four quarters, the index registered at 98.85, which is 3 basis points more than the second quarter of 2011, and thirty one basis points lesser than last year around the same time. It is also seventy three basis points lesser than the second quarter results of 2009.

Chet Wiermanski, global chief scientist from TransUnion has stated that the auto insurance risk is now transitioning towards a period of higher risk, going by the Auto Insurance Risk Index in each state. Wiermanski also added that though the 0.03% increase in the risk index may seem minor at the national level, at least 34 states had experienced an increase during the last quarter. This is quite significant and suggests that there are some fundamental changes in the levels of auto insurance risk that is taking shape.

During the second quarter of 2011, almost every state other than Vermont witnessed a decline in the risk index. At least 47 states along with DC, witnessed a decrease, year after year, while Oregon had the highest decline of fifty five basis points. The second is New York with a drop of fifty four basis points followed by Montana with a drop of fifty basis points.

This Auto Insurance Risk Index has been designed as a risk barometer and is designed to predict the loss ratio for insurance in the market segments all over the nation. Some of the main factors in the risk index include TransUnion’s insurance risk models that are impacted by the length as well as the stability of credit performance. The risk index helps in comparing risk levels across various demographic segments and geographic locations. A state which has a risk index of 110 will have an extra 10% risk, when compared to a state with a risk index of 100.

Kelley Buchanan, executive Vice President, TransUnion’s insurance business unit has stated that the fall in the Auto Insurance Risk Index had actually been decelerating prior to this quarter, showing a rebound in this sector, since consumers had started replacing the aging automobiles. Since the newer fleet of automobiles is relatively expensive to repair, low-loss ratios may soon disappear and auto insurance carriers will have to face this reality as consumers are replacing their older vehicles with new ones.