A Review of the Little Report of Rates of Return in the Property Liability Insurance Industry [Discussion]

Robert A. Bailey, in his article, “A Review of the Little Report on Rates of Return in the Property and Liability Insurance Industry,” has examined the basic A. D. Little (ADL) equation. The equation: [equation here- see paper] is the basis for their conclusion that the insurance industry is unprofitable. Bailey gives cogent, logical arguments why the profit equation used by ADL has serious shortcomings, and why it substantially understates the actual rate of return.