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Battling rising prices: increases in costs of key components in claims drive price indexes for the property/casualty industry''s major business lines.

Article Excerpt
Physician services, hospital services, legal costs and auto-body repair expenses continued to outpace the general rate of inflation, keeping the price indexes for most of the property/casualty industry's major business lines above the consumer price index for the period 1999-2001, although many dropped below the CPI for 2001.

This article presents an update of the Masterson Indexes, detailing the annual average cost indexes for property/casualty coverage from 1990 through 2001, plus a forecast for 2002. The annual changes in the indexes are shown in "U.S. Claim Cost Indexes, Annual Percentage Increases."

A property/casualty insurer's claims settlements are affected directly by economic factors as they relate to price, salary and wages. In economic terms, claim costs for loss and loss-adjustment expenses are an insurer's cost of production. Insurers' major costs include physician services and other medical expenses; hospital care and rehabilitation; lost time and wages; automobiles, including repairs and parts; building materials and construction labor; and personal effects. The components for loss-adjustment expenses are those incurred by insurance companies in settling claims, such as lawyers' fees and other legal and court costs.

During the...