CHICAGO, IL--(Marketwire - March 22, 2010) - New TransUnion data finds that its proprietary Insurance Risk Index declined for the second straight quarter at the end of 2009, possibly pointing towards a moderation in risk for the U.S. insurance industry. Developed as a risk barometer specifically for the insurance industry, the Insurance Risk Index is designed to show the relative expected loss ratio for market segments throughout the country.
The Insurance Risk Index decreased by 14 basis points in the fourth quarter of 2009, falling from 99.46 in the third quarter of 2009 to the current 99.32 level. The last time the Insurance Risk Index decreased two consecutive quarters was prior to the current recession between the fourth quarter of 2006 and the first quarter of 2007.
The key ingredient in the Insurance Risk Index is TransUnion's insurance risk models, which are influenced by the length and stability of responsible credit performance. Benchmarked to the U.S. national average of 100 as of March 31, 2001, the Insurance Risk Index facilitates comparisons across geographies and demographic segments. For example, a state with an index of 110 is 10 percent riskier than a state with an index of 100.
"The drop in the Insurance Index is encouraging news for the industry and consumers," said Geoff Hakel, group vice president in TransUnion's insurance business unit. "Allowing the insurance industry to compare the risk level of states in which they operate to their own portfolios creates an environment where more informed risk decisions can be made. Better portfolio management has the potential to lead to better insurance pricing for consumers."
TransUnion's Insurance Risk Index - Statistics
From an insurance risk perspective, the Insurance Risk Index posted its second noticeable decrease since the fourth quarter of 2007. More importantly, every state, except Connecticut, Minnesota and Mississippi, exhibited a decline from the previous quarter. Year over year, the Insurance Risk Index has increased only 0.14 percent since the fourth quarter of 2008.
Montana continues to rank as the riskiest state with an index of 109.33. It is followed by Washington (105.56), Mississippi (103.02) and Arkansas (101.78). The states demonstrating the least risk from an insurance risk perspective are Alaska (94.80), Minnesota (95.34), Massachusetts (95.41) and Hawaii (95.82).
"The Insurance Risk Index, which today stands below 100, should continue to drift slightly lower and then flatten out over the next few quarters as employment conditions across the U.S. improve. Improving employment conditions enable more consumers to remain current on their existing credit obligations, as the timely repayment of credit obligations is an important component within TransUnion's insurance risk models," said Chet Wiermanski, global chief scientist at TransUnion. "In particular, the second consecutive quarterly decline in the Insurance Risk Index within more than 47 states is very encouraging."
TransUnion's Trend Data database
The source of the underlying data used for this analysis is TransUnion's Trend Data, a one-of-a-kind database consisting of 27 million anonymous consumer records randomly sampled every quarter from TransUnion's national consumer credit database. Each record contains more than 200 credit variables that illustrate consumer credit usage and performance. Since 1992, TransUnion has been aggregating this information at the county, Metropolitan Statistical Area (MSA), state and national levels.
As a global leader in credit and information management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering comprehensive data and advanced analytics and decisioning. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Founded in 1968 and headquartered in Chicago, TransUnion employs associates in more than 25 countries on five continents. www.transunion.com/business
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