RealTime IT News

InsWeb: Car Insurance Costs Creeping Up

Think that last rate hike on your auto insurance was outrageous? You're not alone. Online insurance quote operation InsWeb is launching a new car insurance price index and they say rates on average are up about 40 percent since the first quarter of 2000.

The Sacramento, Calif.-based company used its database of information from the hundreds of thousands of consumers who have requested quotes at the Web site to develop its InsWeb Auto Insurance Index.

The index, designed to identify and track general pricing trends of personal auto insurance sold via the Internet, suggests that since the beginning of 2000, auto insurance rates on average are rising at about 16 percent a year.

Why so much so fast? InsWeb cited rising claims costs driven primarily by medical costs, significantly higher vehicle repair costs, rising jury awards and continued fraud and abuse, as well as lower investment income generated by insurers, due to falling interest rates and the decline in the stock market.

The index is calculated from quotes viewed at InsWeb by consumers in all states (except New Jersey and Massachusetts) for both 6-month policies and 12-month policies; it is a weighted average of the separate indices for 6-month and 12-month policies.

An average of 1.3 million quotes per quarter were analyzed.

"With prices expected to continue to rise in 2002, insurers working with InsWeb should be able to target specific consumers to reach their new business goals, as well as keep an eye on their existing customer base, especially those customers with favorable risk profiles that may be sensitive to price changes," said Kiran Rasaretnam, the company's senior vice president of finance and chief actuary.

InsWeb, of course, has a vested interest in keeping sales up on its site. The company makes more than 80 percent of its revenues from transaction fees; insurers also pay InsWeb to pass on customer leads.

The company has not yet had a profitable quarter, according to data from Multex Investor. For the six months ended June 30, revenues were up 3 percent to $13.2 million. Net loss before extraordinary items was $5.6 million.