Most U.S. personal auto insurers continue to report underwriting losses despite sharper improvement in premium rates, with the 2023 marked by continued unfavorable claims severity and higher catastrophe related losses. Future profit improvement will continue to be hindered by unusually high loss severity (see TOP 10 Largest U.S. Auto Insurance Companies).
According to Fitch Ratings, a review of personal auto segment results from public company GAAP filings reveals that for a group of nine insurers that report quarterly personal auto segment results, aggregate written premiums were up 10% from the prior year.
U.S. Auto Insurance Written Premium and Combined Ratios
The segment’s combined ratio (CR) moved down slightly to 100.4% from 101.3% in 2022, attributable to a return to strong underwriting profit at GEICO. Aggregate GAAP Written Premiums Rose 10.2% YoY.
U.S. Auto Insurers Written Premium
| Written Premium, $ mn | 2023 | % Chg |
| 1. Progressive | 23,714 | 23.6% |
| 2. GEICO | 19,509 | -0.9% |
| 3. Allstate | 16,618 | 10.6% |
| 4. Travelers | 3,680 | 10.2% |
| 5. Kemper | 1,675 | -12.1% |
| 6. Hartford | 1,072 | 6.6% |
| 7. Hanover | 691 | 8.6% |
| 8. Cincinnati Financial | 374 | 18.4% |
| 9. Horace Mann | 208 | 7.4% |
| Group Aggregate | 67,540 | 10.2% |
All other reviewed carriers reported weaker year-over-year CRs and Progressive Corporation (PGR) was the only other carrier to report a sub 100% CR. Carriers reporting an auto CR above 110% for 2023 include: Kemper Corporation, Horace Mann Educators Corporation and The Hartford Financial Services Group (see U.S. Auto Insurance Claims Satisfaction Study).
U.S. Auto Insurers Combined Ratios
| Combined Ratios, % | 2023 | 2022 |
| 1. GEICO | 93.7% | 103.4% |
| 2. Progressive | 99.1% | 95.1% |
| 3. Allstate | 106.4% | 105.0% |
| 4. Travelers | 106.9% | 101.9% |
| 5. Hanover | 107.9% | 98.1% |
| 6. Cincinnati Financial | 108.1% | 103.0% |
| 7. Kemper | 111.2% | 111.1% |
| 8. Horace Mann | 112.8% | 110.6% |
| 9. Hartford | 113.3% | 97.0% |
| Group Aggregate | 100.4% | 101.3% |
An inordinate number of convective storm events across the U.S. created substantial losses in the homeowners’ market, but also added incurred claims to auto writers. For this subject group, catastrophe losses were 2% of 2023 earned premiums, compared to 0.9% in the year earlier period (see U.S. Auto Insurance Performance & Underwriting Results).
GEICO’s performance recovery efforts over the last 12 months included a 16% increase in average premium per policy, reductions in advertising expense, and a 14% reduction in policies in force, which contributed to conceding the second largest personal auto market position behind perennial leader State Farm to PGR.
All auto carriers are taking more aggressive pricing and underwriting actions in response to recent results.
CPI data from the Bureau of Labor Statistics indicates that Motor Vehicle Insurance costs have increased by over 10% annualized for each month since September 2022, including a 17% jump in June 2023 (see 6 Major Types of Car Insurance in U.S.).
U.S. Motor Vehicle Insurance Cost Changes
Insurance Costs Were Up 16.9% YoY in June, the 10th Consecutive Month > 10% Growth
Personal auto loss severity patterns spiked beginning in 2H21 tied to higher general inflation, with higher costs in particular for auto parts and components, repairs, medical costs, and used vehicles.
Higher litigation and settlement costs also contribute to rising claims severity. Major auto writers continued to report sharp severity increases in their latest earnings releases.
PGR and Allstate Corporation each reported an 11% YTD increase in claims severity across all coverages. These more volatile, negative claims trends increase the likelihood of insurers reporting adverse development on personal auto loss reserves in the near term.
FAQ
Many U.S. personal auto insurers are experiencing underwriting losses despite an improvement in premium rates. Losses are primarily due to rising claims severity and higher catastrophe-related losses.
According to Fitch Ratings, aggregate written premiums from a group of nine insurers increased by 10% year-over-year, with written premiums rising significantly for most major carriers.
The combined ratio (CR) for the personal auto insurance segment slightly improved, moving from 101.3% in 2022 to 100.4% in 2024. However, several carriers still reported CRs above 110%, reflecting losses.
In 2024, catastrophe losses accounted for 2% of earned premiums for the group, a significant increase compared to 0.9% in the previous year, largely due to storm events affecting the auto and homeowners’ markets.
Auto insurers are implementing more aggressive pricing and underwriting strategies to manage rising costs and claims severity. GEICO, for example, increased average premiums and reduced advertising expenses and policies in force.
Claims severity is rising due to higher inflation affecting auto parts, repair costs, medical expenses, and litigation costs. Insurers like Progressive and Allstate reported an 11% year-to-date increase in claims severity.
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AUTHORS: James Auden, CFA – Managing Director Fitch Ratings North American Insurance, Christopher Grimes, CFA – Senior Director Fitch Ratings, Laura Kaster, CFA – Senior Director Fitch Wire – North and South American Financial Institutions
