NU Online News Service, March 23, 9:53 a.m. EDT

A credit scoring firm said its barometer showing the relative expected loss ratio for insurance market segments has indicated improving conditions.

Chicago-based TransUnion said its Insurance Risk Index declined for the second straight quarter at the end of 2009, possibly pointing towards a moderation in risk for the U.S. insurance industry.

The Insurance Risk Index decreased by 14 basis points in the fourth quarter of 2009, falling from 99.46 in the third quarter of 2009 to the current 99.32 level. The last time the Insurance Risk Index decreased two consecutive quarters was prior to the current recession between the fourth quarter of 2006 and the first quarter of 2007, said TransUnion.

The firm said a key ingredient in its Insurance Risk Index is its insurance risk models, which are influenced by the length and stability of responsible credit performance. TransUnion produces consumer credit reports.

Benchmarked to the U.S. national average of 100 as of March 31, 2001, the Insurance Risk Index facilitates comparisons across geographies and demographic segments. For example, a state with an index of 110 is 10 percent riskier than a state with an index of 100, TransUnion explained.

"The drop in the Insurance Index is encouraging news for the industry and consumers," said Geoff Hakel, group vice president in TransUnion's insurance business unit.

Mr. Hakel added that, "Allowing the insurance industry to compare the risk level of states in which they operate to their own portfolios creates an environment where more informed risk decisions can be made. Better portfolio management has the potential to lead to better insurance pricing for consumers."

TransUnion's Insurance Risk Index reported that every state, except Connecticut, Minnesota and Mississippi, exhibited a decline from the previous quarter. Year over year, the Insurance Risk Index has increased only 0.14 percent since the fourth quarter of 2008.

Montana continued to rank in the Index as the riskiest state with an index of 109.33 followed by Washington (105.56), Mississippi (103.02) and Arkansas (101.78).

The states demonstrating the least risk from an insurance risk perspective are Alaska (94.80), Minnesota (95.34), Massachusetts (95.41) and Hawaii (95.82).

Chet Wiermanski, global chief scientist at TransUnion, said the Index should continue to drift slightly lower and then flatten out over the next few quarters as employment conditions across the United States improve.

"Improving employment conditions enable more consumers to remain current on their existing credit obligations, as the timely repayment of credit obligations is an important component within TransUnion's insurance risk models," said Mr. Wiermanski.

"In particular, the second consecutive quarterly decline in the Insurance Risk Index within more than 47 states is very encouraging," his statement concluded.

TransUnion said the source of the underlying data used for its analysis is TransUnion's Trend Data, a one-of-a-kind database consisting of 27 million anonymous consumer records randomly sampled every quarter from TransUnion's national consumer credit database.

Each record contains more than 200 credit variables that illustrate consumer credit usage and performance. Since 1992, TransUnion has been aggregating this information at the county, Metropolitan Statistical Area (MSA), state and national levels.

www.transunion.com/trenddata