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Higher Premium Rates in Personal Auto and Home Insurance Lines

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Personal lines products

Auto insurance and homeowner’s insurance form two important product types of the personal lines business. In the US, such products are offered by insurers like AIG (AIG), Travelers (TRV), Hartford (HIG), and Chubb (CB), as well as other P&C insurers that the Financial Select Sector SPDR ETF (XLF) holds.

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Auto insurance

Premium rates for auto insurance products increased by 2% in February 2015 compared to the rates a year earlier. However, rates contracted by ~1% compared to the previous month, which could be a seasonal impact. P&C insurers like AIG (AIG), Hartford (HIG), and Travelers (TRV) saw rate increases in their personal auto business lines in 4Q14. As the above chart shows, higher auto sales impacted rate increases in auto insurance.

Home insurance

Travelers (TRV), Hartford (HIG), and AIG (AIG) reported increases in pricing for home insurance products in 4Q14. Rates of homeowners insurance products were up by ~2%  in February 2015, when compared to the corresponding month in the previous year, as shown in the chart above. Housing completions and new home sales generally aid increases in home insurance rates.

The non-admitted home insurance line, which writes insurance for higher risk events, like natural catastrophes, saw rate decreases due to additional capacity, as more players entered the market. Apart from this line, rates remained fairly stable for personal lines insurers in February 2015.

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