US Insurers Have Been Losing Billions On Policies Since the Pandemic: Here’s How They Plan To Get Even - The Average Joe


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    US Insurers Have Been Losing Billions On Policies Since the Pandemic: Here’s How They Plan To Get Even

    Noah Weidner

    April 24, 2024

    Sometimes in life, you’re the windshield — and sometimes, you’re the bug. But after years of being the bug, insurance companies are hoping to become more durable in their next life. In 2023, global insurance losses exceeded $123B according to Gallagher Re — the fourth consecutive year with losses exceeding $100B. With this unsettling trend unlikely to change, insurers are pulling out the stops to ensure they control the windshield in 2024.

    Insurer comeback: Catastrophe losses more than doubled from 2019 to 2022 as natural disasters and higher prices affected domestic insurers. Last year, property and casualty policies lost $21B — a slight improvement from 2022. This modest recovery was fueled by insurers hiking premiums — a strategy they plan to continue this year, which could shape 2024 into a comeback year. However, their success may come at the expense of policyholders.

    • Home insurance premiums soared by 8.6% last year to a new record — while auto insurance rates sawdouble-digit spikes, marking the largest increases since the 1970s.
    • This has helped insurers Progressive ($PGR) and Allstate ($ALL) offset dramatic losses — driving their stocks up 34% and 25%, respecitvely, this year, making them standout performers in the S&P 500.

    Your loss is their (premium) gain

    Some insurers argue that price hikes are necessary to cover mounting losses from increasingly problematic catastrophes — and to compensate for lower premiums during COVID. Either way, they’ve sent insurer profits skyrocketing, with Progressive’s earnings in the latest quarter more than doubling from the previous year. And with prices expected to continue rising and insurers threatening to leave states, profits could soar even higher.

    • Insurers took drastic measures last year, withdrawing coverage from disaster-prone states like California and Florida — leaving many uninsured and exacerbating the affordability crisis.
    • However, Allstate recently resumed new insurance sales in California after regulators allowed them to raise prices by an average of 30%.

    Return of reinsurance: Reinsurance firms, which insure the insurance companies, have also recovered — with Arch Capital Group ($ACGL) and Renaissancere ($RNR) seeing gains of 23.4% and 9.8% respectively this year. Last year, they posted significant increases in return on equity as investors flocked back to the insurance business — which could eventually help alleviate some of the pressure on insurance inflation in the long run.

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