The U.S. property/casualty industry saw its second consecutive year of underwriting losses, with a net combined ratio of 101.6 for 2023. While improved relative to 2022, personal lines remained the major driver of unprofitability in 2023. Premium growth is expected to further improve underwriting results in 2024, with the 2024 P/C industry net combined ratio forecast at 100.2, according to the latest industry underwriting projections by actuaries at the Insurance Information Institute (Triple-I) and Milliman, a collaborating partner. Insurance Economics and Underwriting Projections: A Forward View, was presented today at Triple-I’s exclusive members-only webinar.
Dale Porfilio, FCAS, MAAA, chief insurance officer at Triple-I, discussed the overall P&C industry underwriting projections and premium growth. “The overall picture from prior quarters remains the same with commercial lines performing better than personal, but to a lesser extent,” he said. “The 2023 commercial lines net combined ratio was 96.2, 1.4 points worse than the 2022 result. While still unprofitable, personal lines improved 3.2 points relative to 2022. For 2023, the personal lines expense ratio improved by almost 2 points over 2022, most dramatically in personal auto. The net written premium growth rate for personal lines surpassed commercial lines by over seven points in 2023. Continued personal lines premium growth should lead to further convergence in underwriting performance in 2024.”
Jason B. Kurtz, FCAS, MAAA, a principal and consulting actuary at Milliman – a premier global consulting and actuarial firm – said that for commercial auto, the 2023 net combined ratio of 109.2 is 3.8 points higher than 2022, and 10.3 points higher than 2021. “The improved underwriting results following the COVID-19 pandemic appear to have been short-lived, as the commercial auto underwriting results have once again deteriorated and adverse prior year development has returned to pre-COVID levels,” Kurtz said.
Looking at the workers’ compensation line, Kurtz noted that the 2023 net combined ratio of 87.3 is nearly identical to 2022 and the second lowest in over 15 years. “2023 net written premium growth rate of 1% is expected to increase to 2% in 2024 and remain at that level of growth through 2026. Favorable underwriting results are expected for our forecast horizon, which in turn will dampen premium growth going forward,” he said.
Donna Glenn, FCAS, MAAA, chief actuary at the National Council on Compensation Insurance (NCCI), said the workers’ comp system is in a period of extraordinary performance. “WC leads the P/C industry with the lowest combined ratio compared to all other lines of business,” she said. Further highlighting the strong results, Glenn said 2023 is the 10th consecutive year of underwriting gains and seventh consecutive year with combined ratios under 90.
Michel Léonard, Ph.D., CBE, chief economist and data scientist at Triple-I, discussed how P/C replacement costs are increasing at a slower pace than the overall U.S. Consumer Price Index (CPI). “P/C replacement costs benefited from greater deceleration of key CPI components such as construction materials and used auto costs. We expect this trend to continue until early 2026,” he said.
Léonard noted that personal and commercial auto replacement costs decreased outright in the first four months of 2024, continuing their 2023 trend, largely due to double-digit outright decreases for used auto prices. “Even homeowners’ replacement cost changes, the segment subject to some of the highest replacement cost increases over the past few years, is now lower than overall CPI,” he added.