Personal Auto Results Slow to Recover; GEICO, Progressive to Pass State Farm

July 19, 2022
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With an overall combined ratio in excess of 100 for the first time since 2017, private passenger auto joined homeowners in unprofitable territory last year, prompting carriers to respond with pricing and underwriting actions.

But improvement in the auto line may be slow to materialize, Fitch Ratings said in its U.S. Personal Lines Market Update, which also shows homeowners combined ratios above the breakeven point four times in the last five years, including 2021.

The report includes listings of the top 10 carriers in both the personal auto and homeowners lines, along with a prediction from Fitch analysts that GEICO and Progressive will overtake State Farm on the personal auto leaderboard in terms of premium volume in 2023.

Overall, while total U.S. personal lines insurance written premiums rebounded with a 5% jump in 2021 following flat growth in 2020, the sector combined ratio came in a 102.1—a sharp turn from an average of 98.3 in the previous three years.

In prior years, personal auto had helped the overall figure, but the auto combined ratio deteriorated sharply to 101.4 in 2021—up 9 points from 92.5 in 2020, which had been the best result in at least 25 years, Fitch reported.

Not only did the benefits of reduced driving activity during the pandemic in 2020 diminish last year, but carriers were also dealing with higher inflation and supply chain shortages, materially pushing up physical damage claims costs. In fact, for the physical damage component of the personal auto line of business, the aggregate combined ratio soared to 104 from 89 in 2020. According to Fitch, the 104 combined ratio is the worst physical damage result in two decades.

A 104 combined ratio in the homeowners line for 2021 was not the worst. A year earlier, homeowners had a 107 combined ratio. In fact, 2019 was the only year in the last five in which the combined ratios was below 100 (99), as homeowners insurers grapple with uncertain catastrophe loss experience and now face greater difficulty in insurer in value amid higher inflation—with property values and construction costs rising.

The report also discusses loss reserve changes for the auto and homeowners lines, the prospect of utilizing advanced IT and analytics to boost carrier operating efficiency, customer experience and pricing, as well as the greater acceptance of telematics by customers, before going on to present the top 10 lists for each line.

In auto, State Farm has been experiencing flat growth. While State Farm still had a 16.4% share of the market, GEICO and Progressive—with market shares of 14.7% and 14.1%—have been expanding revenues faster than the overall market during a three-to-five year time frame, Fitch reported.

According to Fitch, Progressive, GEICO, Liberty Mutual and Travelers were the only auto insurers in the top 10 to post combined ratios lower than 100 last year.

For the homeowners line, three top 10 carriers—Allstate, American Family and Chubb—reported underwriting profits last year.

State Farm remains the largest homeowners insurer by volume—$21.6 billion with a 20.9% market share. Allstate is second with 9.2% of the market.

Although Progressive moved to diversity into the homeowners line in recent years, it only has 1% of the market. With under $2.0 billion in net premiums for homeowners, Progressive took 10th place among the largest writers this year, surpassing Erie Insurance and Auto-Owners Insurance Group.

Topics Auto Personal Auto

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