Many tire dealers may think they're purchasing their insurance at fair-market price, but what's actually happened in many cases is that the carrier's been charging premiums that are too low to cover catastrophic claims.
Insurance companies once made their income from stock market investments, but that spigot was shut off months ago. Consequently, some outfits will be forced out of the market, insurance-industry observers predict.
Why the increases?
The insurance industry has always been cyclical, for one. Adding to the upward pressure were the 9/11 terrorist attacks, corporate misconduct, the slump on Wall Street, scares over mold infestations in Texas-even natural disasters such as earthquakes in California or freezes in the Southeast.
And of course, litigation.
``Medical costs drive claims payments for both workers compensation and liability claims,'' said Jerry McAndrews, senior vice president of the Automotive Specialty Markets division of Universal Underwriters Insurance Co. ``Today, one in five jury awards is more than $1 million, compared to one in 14 in 1994. The median award in product-liability suits, not including punitive damages, has more than quadrupled since 1994, rising from $434,247 to $1.8 million in 2000, according to Jury Verdict Research.
``The median premise liability award has risen from $61,233 in 1994 to $114,862 in 2000. The employment practices liability award more than doubled over the same period, from $93,000 in 1994 to $218,000 in 2000.''
A turnaround will come, but insurance experts disagree on whether it will take a year or three years. ``The market is realizing that if they don't write the business, they'll be out of business,'' said Phil Muller, of Affiliated Agency Inc. ``But for now, they're getting their pound of flesh.''