2006 Product Liability Report
EXECUTIVE SUMMARY
Product liability insurance provides protection against claims rising from use, handling or consumption of a product. The following report provides detailed information on specific characteristics of claim handling, claim costs and profitability of this line of insurance. In 2006, product liability insurers in Missouri sold $44,403,319 in coverage, paid $20,352,833 in losses and estimated future losses on 2006 claims of $16,253,820.
As illustrated in this report, over a 10-year period, product liability writers experienced elevated loss ratios - losses paid and incurred as a percentage of earned premium - with the highest reported in 2002. The lowest loss ratio occurred in 1997 at -79.9 percent*. From 2005 to 2006, the loss ratio decreased significantly from 9.7 percent to 38.5 percent. In such relatively small lines of business, highly volatile losses and loss ratios are common.
The closing of claims with payment decreased 57 percent from 2005 to 2006. Over a 10-year span, the highest number of claims closed with payment occurred in 2004. Average indemnity paid on claims reached an all time high of $96,398 in 2005. The average allocated loss (legal-related) expenses for paid claims in 2006 was $5,820.
The number of companies writing direct business for product liability insurance has fluctuated slightly over the past 10 years, with 144 companies writing in 2006.
This report has been compiled using closed claim data as reported under Section 374.415, RSMo and the Missouri Supplement to Page 20 of the Annual Statement.** As a result, the accuracy of this report is dependent upon the accuracy of each company's annual statement and submission of closed claim data. Future releases of this data may contain revisions.
Any questions concerning this report should be addressed to the Statistics Section, Department of Insurance, Financial Institutions & Professional Registration, P.O. Box 690, Jefferson City, MO 65102-0690.
*Negative loss ratios can occur when insurers correct past over-reserving.
**To view the most recent Product Liability data, visit the Supplement Data Report page, select "Product Liability" under the "Property and Casualty Line" menu. Select year desired then click submit.