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Dec
9

Insurance Industry Profit Margins

Weiss Ratings has recently released their report on insurance industry profitability, and the news is both good and bad. Good if you compare it to past year’s reports, bad if you are expecting robust returns.
The report notes: “Of the 544 insurers studied by Weiss for the year ending 2003, 69 percent experienced either negative margins or profit margins of less than five percent.”
Makes the grocery business look like a great investment.
Breaking down the numbers further by category, here are the individual industry sector results:
HMO – 3.8%
Life Insurance – 8.2 percent
Health Insurance – 5.5 percent

and the overall winner for most profitable insurance sector is…
P&C at 8.3 percent
Not surprisingly for those who have been reading our blog, the culprit appears to be the industry’s inability to contain rising health care costs.
Melissa Gannon, Weiss VP, notes: “”Although the industry has enjoyed an increase in revenues by raising premiums, insurers have also had to deal with the rising cost of medical care as a result of more open networks, an aging population, expensive medical advances, and an inefficient healthcare system.”
While some in the media believe we are all wintering in St Bart’s except for those brief holidays in the Alps, the truth is we continue to work very hard to combat health care costs, and do not appear to be making much progress.
Note – For those unfamiliar with Weiss, they are perhaps one of the more critical rating agencies, but their tough standards have been validated time and again as the more recognized entities have missed such debacles as Kemper Insurance’s sudden demise.


2 thoughts on “Insurance Industry Profit Margins”

  1. I can’t let another day go by without congratulating Joe Paduda on this exceptionally thoughtful and perceptive weblog. He’s not writing just to see his screed in print, and it really shows.
    Thank you, Joe. Your work is appreciated.

  2. Risks in health care are many and varied, and are no harder to see than the front-page news. They include record settlements, limits to services, closures of facilities, physicians bailing out, and consumers, employers, doctors, hospitals, insurers and the government all trying to shift costs among one another to keep the system functioning.

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Joe Paduda is the principal of Health Strategy Associates

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