Will the Hoosier State’s P/C Market Race Ahead’

The U.S. Census Bureau’s 2000 census estimated Indiana’s population at a little more than 6 million. About 82 percent of the adult residents had graduated from high school and about 19 percent had earned a bachelor’s degree or higher. The capital city, Indianapolis, has a population of 781,870.

From an employment perspective, the primary industries in Indiana are:

From a property/casualty perspective, Indiana accounted for $8.8 million in direct written premium. Countrywide as of Sept. 30, 2003, the direct written premium aggregate was $313.8 billion. Indiana’s calendar-year 2002 loss ratio of 66.6 percent was modestly above the countrywide year-to-date Sept. 30, 2003, loss ratio of 62.3 percent. Perhaps this reflects the competitive nature of the Indiana marketplace as regional and national insurers, each searching for an edge, compete on price.

I was surprised by the level of defense and cost-containment expense associated with medical malpractice insurance in Indiana. The pure loss ratio for calendar-year 2002 was 65.9 percent yet with defense and cost containment expenses the ratio almost doubled to 119.3 percent.

The Indiana economy is growing, though it continues searching for an identity. The employed civilian population comprises nearly one half of Indiana’s population. It is distributed as follows:

Given the intense competitive pressures in the Indiana marketplace, I would expect the growth rate of Indiana’s P/C marketplace, as measured by direct premium written, to approximate the growth rate experienced on a countrywide basis.

This article was written by Joseph L. Petrelli, president and founder of Demotech Inc., a Columbus, Ohio-based financial analysis and actuarial services firm. Petrelli is a member of the Casualty Actuarial Society, American Academy of Actuaries and the Conference of Actuaries in Public Practice. Additional information can be found at www.demotech.com.