Unprofitable auto results, caused by the cost of repair, supply chain delays and inflation, have contributed to a significant weakening of US underwriting results for the personal lines segment. 

The AM Best report says the drop sent the property & casualty (PC) industry’s net underwriting income to a $US25.7 billion ($38.2billion) loss in 2022. 

The report says losses on the personal auto line represented more than 80% of the 2022 personal lines loss and was nearly eight times higher than the previous year.  

The homeowners/farmowners line also faced a net underwriting loss for a third straight year. 

Best’s Special Report outlines 2022 financial results on each line of business with corresponding analysis drawn from statutory statements from companies received in May 2023. 

The 2022 underwriting loss comes after a $US3 billion ($4.46 billion) loss in 2021.  

“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,” AM Best Industry Research and Analytics Associate Director David Blades said. 

“These factors elevated claims expense figures and challenged insurance companies’ reserving practices, adversely affecting their operational performance.” 

The report notes that the commercial lines segment generated positive underwriting results in 2022, and despite some volatility, has posted profitable results in four of the past five years. 

In 2022, the strong performance of workers’ compensation, other liability (claims-made), and surety coverage led to a $US14.7 billion ($21.8 billion) underwriting gain.  

Underwriting results for commercial property insurers, other liability and medical professional liability improved as well, even though those lines remained unprofitable. 

“Social and medical inflation have contributed to higher loss costs. 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 Industry Research and Analytics Senior Industry Analyst Christopher Graham said. 

The report notes that on the plus side fears new strains of Covid-19 could still “emerge and dampen the effectiveness of strategies insurers were already using to navigate post-pandemic waters were largely allayed”.