-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

98 99 00 01 02 03 04 05 06 07

MI All Lines US All Lines

RNW: All Lines Michigan vs. All Line US, 1998–2007*

Avg. RNW

MI: 7.2%

US: 7.6%

Profitability in Michigan’s property/casualty insurance markets is

below that of the US p/c insurance average

*Latest available return on net worth (RNW) figure from the National Association of Insurance Commissioners is 2007.Sources: NAIC, Fortune; Insurance Information Institute.

Figure 1.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

98 99 00 01 02 03 04 05 06 07

MI All LinesAll US Industries

RNW: Michigan All Lines vs. Fortune 500, 1998–2007*

*Latest available return on net worth (RNW) figure from the National Association of Insurance Commissioners is 2007.Sources: NAIC, Fortune; Insurance Information Institute.

Avg. RNW

MI: 7.2%

US: 13.6%

Profitability in Michigan’s property/casualty insurance markets is barely half that of the Fortune 500 benchmark

Figure 2.

-10%

-5%

0%

5%

10%

15%

98 99 00 01 02 03 04 05 06 07

U.S. Auto MI Auto

RNW: Michigan Pvt. Pass. Auto vs. US Pvt. Pass. Auto, 1998-2007*

Avg. RNW

MI: 2.1%

US: 8.4%

Profitability in Michigan’s auto insurance market—at just

2.1%--is just 1/4 that of the US average

*Latest available return on net worth (RNW) figure from the National Association of Insurance Commissioners is 2007.Sources: NAIC, Fortune; Insurance Information Institute.

Figure 3.

5.3% 5.7%4.8% 4.6%4.7%

2.7%

-5.8%-4.1% -3.5%

6.1%

-2.2%

6.0%5.0% 4.6%

4.0% 4.3% 4.3%

7.2%

9.1%

7.0%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

98 99 00 01 02 03 04 05 06 07

MI Auto RNW 10-Yr US Treasury Yield

Percent

Michigan Auto RNW vs. 10-Year US Treasury Yield, 1998-2007*

*Latest available return on net worth (RNW) figure from the NAIC is 2007.Sources: NAIC, Federal Reserve; Insurance Information Institute.

Avg. RNW

MI: 2.1%

US: 4.9%

The average return experienced by Michigan’s auto insurers is less than half that of a risk-free investment in 10-year US Treasury securities.

MI’s auto insurance market is not risk free.

Figure 4.

Average Auto Insurance ExpenditureMichigan vs. US, 2000-2007*

Year MI Rank US2000 $702 16 $6902001 735 18 7262002 887 14 7862003 950 10 8302004 980 10 8422005 931 13 8312006 925 13 8162007 928 11 795

*Latest available data from the National Association of Insurance Commissioners is for 2007.Sources: NAIC; Insurance Information Institute.

Figure 5.

Consumer Price Index for Medical Care vs. All Items, 1960-2008

215.2

364.1

0

100

200

300

400

60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

Ind

ex V

alu

e (1

982-

84=

100)

All Items Medical Care

Source: Department of Labor (Bureau of Labor Statistics; Insurance Information Institute.

(Base: 1982-84=100)

Inflation for Medical Care has been surging

ahead of general inflation (CPI) for 25

years. Since 1982-84, the cost of medical care has

more than tripled

Soaring medical inflation is a major

driver of cost in Michigan no-fault

auto insurance claims, with no end

in sight.

Figure 6.