US personal line insurers have been moved to adjust pricing and underwriting in response to weaker results, which have felt the pressure of rising inflation and costs, according to a recent report.
Fitch Ratings analysts have reported that US personal lines insurance written premiums saw a 5% increase in last year following flat growth in 2020, yet, the sector’s combined ratio (CR) rose to 102.1% for 2021.
This was a big contrast to an average of 98.3% in the previous three years, as the personal auto CR deteriorated sharply to 101.4% in 2021 from record performance of 92.5% in 2020.
Improvement in the auto line may be slow to materialise, analysts highlighted, as profits sharply reversed in 2021 compared to 2020, which saw the best profits in at least 25 years.
The rating agency wrote: “Benefits from reduced driving activity and claims incidence amid the pandemic greatly diminished in 2021, along with a material escalation in claims severity from higher inflation and supply chain shortages, particularly in physical damage coverage.”
Regarding the homeowners insurance segment, even though an improvement in the combined ratio was reported, from 107% in 2020 to 104% in 2021, there was an underwriting loss for the fourth time in the past five years.
Analysts noted that homeowners results continue to be adversely affected by catastrophe losses in a multitude of jurisdictions.
Fitch Ratings wrote: “Rate increases and rising premium volume in most states provide potential for future improvement. Homeowner underwriters continue to face challenges in insuring to value amid higher inflation as property values and construction costs rise.”
The report also discussed the prospect of utilising advanced IT and analytics to boost carrier operating efficiency, customer experience and pricing, as well as the greater acceptance of telematics usage in auto insurance.