The property and casualty insurance industry is projected to finish 2023 with a combined ratio of 102.2, nearly unchanged from 2022’s final result of 102.4, according to new underwriting forecasts from the Insurance Information Institute (Triple-I) and actuarial firm Milliman. The analysts presented their findings in an August 3 members-only webinar.
Personal auto continues to drag down industry results
The poor underwriting performance is driven primarily by ongoing challenges in personal auto insurance, forecast at a combined ratio of 109.5 for 2023. “Replacement costs continue to decelerate and have now returned to pre-COVID trends as supply chain backlogs and labor disruptions ended,” said Michel Léonard, PhD, chief economist at Triple-I.
Triple-I expects property and casualty replacement costs to increase at a slower pace than overall inflation. “U.S. CPI will likely stay in the mid-to-upper 3 percent range through the end of the year,” said Léonard. He believes U.S. GDP growth may slow in the second half of 2023 but still avoid a technical recession.
Commercial lines continue their strong performance
On the positive side, Triple-I’s Dale Porfilio said commercial lines continue to have strong performance, and personal auto is beginning to show incremental improvement after dismal results in recent years. The analysts foresee net combined ratios improving each year from 2023 to 2025, with the industry returning to a small underwriting profit in 2025.
Homeowners mirror personal auto’s dismal results
Homeowners insurance remains challenged, with the 2023 projected combined ratio of 104.8 nearly matching 2022. Porfilio attributed ongoing underwriting losses through 2025 partly to cumulative 55% replacement cost increases since 2019. He expects elevated premium growth in 2023-2025, driven largely by rate hikes.
Commercial auto expected to show continued losses in 2023
Commercial auto also had poor 2022 results after several years of improvement, said Jason Kurtz of Milliman. His firm forecasts continued commercial auto underwriting losses and the need for further rate increases despite projected premium growth of 7-9% annually through 2025.
workers’ compensation projected to show strong profits until at least 2025
Workers compensation remains a bright spot, with projections of continued strong underwriting profits through 2025. However, premium growth is forecast at a modest 3% annually. Donna Glenn of NCCI cited long-term declines in claim frequency and only moderate medical cost increases as positive factors for the line. She said workers’ compensation claims have also gotten progressively shorter in duration in recent years.
About Insurance Information Institute (Triple-I)
Founded in 1960, the Triple-I provides objective, fact-based information about insurance while being a trusted source of unique, data-driven insights that inform and empower consumers. We want people to have the information they need to make educated decisions, manage risk, and appreciate the essential value of insurance. We have more than 60 insurance company members, including nine of the 10 largest property/casualty insurance writers in the United States. Our focus is to create and disseminate information; we neither lobby on behalf of the insurance industry nor do we sell insurance.
Milliman is among the world’s largest providers of actuarial and related products and services. The firm has consulting practices in healthcare, property & casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe. For further information visit Milliman.