The property-casualty industry in the United States faced significant challenges in its underwriting performance in 2022, with the personal lines segment suffering notable deterioration, particularly in the private passenger auto line of business, according to a new report from AM Best.
The industry's net underwriting income experienced a staggering $25.7 billion loss during the year, the report found.
The report, titled "2022 P/C Snapshot: Unprofitable Auto and Property Results Weaken P/C Underwriting Performance," provides a detailed analysis of the 2022 financial results for each individual line of P&C business. The data was derived from companies' statutory statements received by May 31, 2023.
The report found that the underwriting loss in 2022 followed a $3 billion underwriting loss in 2021 and was largely driven by a massive $40 billion underwriting loss in the personal lines segment. The personal auto line of business was the main contributor to this loss, accounting for over 80% of the overall personal lines loss and nearly eight times higher than the previous year, AM Best said. Moreover, the homeowners/farmowners line also experienced a net underwriting loss for the third consecutive year.
“P/C claims expenses were magnified by inflationary pressures on the costs of repairing property and automobiles, as well as by lingering supply chain issues,” said David Blades, associate director of Industry Research and Analytics at AM Best. “These factors elevated claims expense figures and challenged insurance companies’ reserving practices, adversely affecting their operational performance.”
However, there was a silver lining for the industry, as the commercial lines segment managed to generate positive underwriting results in 2022. Despite some volatility, the segment achieved profitable outcomes in four out of the past five years, AM Best said. Specifically, the robust performance of workers' compensation, other liability (claims-made), and surety coverage contributed to a substantial $14.7 billion underwriting gain. Commercial property insurers, as well as other liability (occurrence) and medical professional liability lines, also showed improvement in their underwriting results, although they remained unprofitable.
“Social and medical inflation have contributed to higher loss costs,” said Christopher Graham, senior industry analyst, Industry Research and Analytics, AM Best. “The number of claims has increased for virtually all casualty lines involving claimant-attorney representation for several years, with juries typically awarding plaintiffs large settlements. As medical technology and treatments advance, medical costs are likely to continue escalating.”
AM Best’s report is in line with an earlier study from Verisk, which reported that 2022 was a challenging year for the P&C sector.
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