U.S. personal lines insurance saw strong premium growth of 8% in 2018 and the sector’s statutory combined ratio of 99% for 2018 represented the market’s best results since 2013, according to a new special report from Fitch.
“Strong performance was buoyed by the auto segment, which benefitted from successive rounds of price increases, underwriting actions and a favorable shift in claims frequency,” says Chris Grimes, director of Insurance at Fitch Ratings. “This improvement offset challenges in the homeowners segment as catastrophe-related losses from hurricanes, wildfires and other events continued to take their toll.”
The auto and homeowners segments posted statutory combined ratios of 98% and 104%, respectively, in 2018.
Fitch analysts said personal auto results are poised for further improvement in 2019, but recent signs of waning momentum for price increases and potential volatility in loss severity patterns could dampen profit trends in the longer term.
According to Fitch, homeowners underwriting performance is also likely to improve in 2019, barring further above-average insured catastrophe experience, based on significant pricing and risk management actions in response to recent large loss events. Personal lines insurance remains competitive. In the auto segment, continued premium growth by leading players, GEICO and Progressive, is narrowing the market share gap with long-time largest auto insurer State Farm. If growth rates are sustained, GEICO’s auto premium volume could surpass State Farm as early as 2022. In homeowners insurance, State Farm’s market share dominance continues to prevail with a 20% market share that is twice the premiums of nearest rival Allstate.
In a competitive environment, insurers are looking to gain an edge on risk selection, pricing, distribution and advertising, according to Fitch. The report says the most successful personal lines underwriters have used advanced technology and data analytics to create operating efficiencies and optimize pricing decisions and claims outcomes. Growing technology investment adds to the benefits of larger operating scale, which is likely to promote greater market concentration in the future, the report concludes.
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