Michigan Still a Loss Ratio Laggard

The U.S. Census Bureau’s 2000 census estimated the Michigan’s population at almost 10 million. About 83 percent of the adult residents had graduated from high school and about 22 percent had earned a bachelor’s degree or higher. The capital, Lansing, has a population of 119,128.

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

From a property/casualty insurance perspective, Michigan accounted for $14.9 million in direct written premium. Countrywide as of Sept. 30, 2003, the aggregate was $313.8 million of P/C insurance written. Michigan calendar-year 2002 loss ratio of 80.2 percent was well above the countrywide year-to-date Sept. 30, 2003, loss ratio of 62.3 percent. It was interesting to note that Michigan’s homeowners’ loss ratio for calendar-year 2002 was slightly above the countrywide average of 61.8 percent through Sept. 30, 2003, yet the private passenger automobile liability loss ratio, which includes the personal injury protection coverage, was 120.1 percent.

Although the impact of Michigan’s unlimited no-fault coverage needs to be examined by each of the carriers writing in Michigan, a surprise was Michigan’s products liability loss ratio of 479.7 percent compared to the countrywide average of 108.4 percent.

The Michigan economy needs to be revitalized. The employed civilian population comprises about 46 percent of Michigan’s population. It is distributed as follows:

Given the anticipated growth in the number of jobs located in Michigan and the need for increased diversification in the Michigan economy, I would expect the growth rate of Michigan’s P/C insurance marketplace, as measured by direct premium written, to lag behind the growth rate experienced on a countrywide basis.

Joseph L. Petrelli is president and founder of Demotech Inc. (www.demotech.com), a Columbus, Ohio-based financial analysis and actuarial services firm. He is a member of the Casualty Actuarial Society, American Academy of Actuaries and the Conference of Actuaries in Public Practice.