Auto Insurance: Factors Affecting Operational Level of Planning

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Auto Insurance: Operational Level of Planning      The insurance industry is affected by many economic factors. In an attempt to better understand the operational level of planning within the insurance industry we would like to take a look at how revenue, operating expenses, and the auto insurance market directly affect the operational level of planning of any given Auto insurance provider. Revenue      Revenue generated by the auto-insurance industry is in the billions. According to Automotive News, the personal auto insurance business is a nearly $160 billion-a-year industry (Stoffer, 2005). Thus, many organizations, not just the auto insurance industries themselves, have generated…show more content…
Nationally, rates still are rising -- albeit at their slowest rate in five years. Spending on auto insurance is expected to grow an average of 1.5 percent this year, to $870 per vehicle, according to the Insurance Information institute. Nevertheless, many drivers are getting a break. In New York, 10 big auto insurers -- including market leaders All State, GEICO Corp. and State Farm Insurance Co. -- have cut rates an average of 5 percent to 6 percent this year, saving New York drivers nearly $350 million(Price Water House Coopers, 1999).      State Farm, the nation's largest auto insurance underwriter with about 19 percent market share, says it has dropped prices in 32 states this year while raising them in just one: North Dakota. We are seeing a more prudent form of competition that is allowing insurers to lower premiums while remaining profitable. An important factor in that prudence is the growth of sophisticated pricing models. Insurers are spending millions on technology that allows them to crunch underwriting data to more accurately match price to a driver's risk. The result: They are able to cut prices with a scalpel instead of a butcher's knife, offering hundreds or even thousands of price points based on drivers' potential risk, instead of lumping them into a few broad categories. For example, one policyholder might get a lower rate than another driver

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