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Insurance Industry is Quietly Making Record Profits

Posted on: Jun 18, 2024

Highlights

  • The p/c insurance industry made a record $88 billion in profits in 2023, even as companies jacked up rates for policyholders.
  • The $88 billion profit was more than double the profits of the previous year and marked the industry’s most profitable year in history.
  • In Q1 2024, profitability continued to surge, reaching $39 billion in one quarter, putting the industry on pace to shatter 2023’s record profits.
  • Despite this, insurance executives continue to complain that they’re not making enough money because of lawsuit abuse and need to limit Americans’ access to the courts.

Record Profits

According to the National Association of Insurance Commissioners (NAIC), the property casualty insurance industry—which covers losses due to property damage, personal injury, and financial loss—earned $88 billion in profits in 2023—its most profitable year of all time—even as insurance executives claimed the sky was falling and insurance companies jacked up rates.[i]

US Property Casualty Insurance Industry

In billions

 

2022

2023

YoY % Change

Net Premiums Earned

$782

$860

10%

Underwriting Income (Loss)

($25)

($18)

25.5%

Loss Ratio

76.4%

76.2%

(0.2%)

Combined Ratio

102.5%

101.5%

(1) pt

Net Investment Income

$71

$121

69.5%

NET INCOME (Profits)

$39

$88

126%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In addition, AM Best reports that Q1 2024 saw profitability continue to surge, with net income reaching $40 billion, putting the industry on pace to shatter the 2023 record profits.[1]

These record profits were made in a year in which insurers raised auto insurance rates by an average of 26%, with some states seeing increases of more than 40%. Insurers also raised homeowners insurance by double digits.

How Did the Industry Make Record Profits?  

How did the insurance industry achieve record profits when the sky was allegedly falling? Analysts suggest one reason might be that insurance companies overreserved for prior years—in other words, insurers set aside more money to pay losses than they needed to.[2] When those losses never materialized, the industry added the reserves to the bottom line.

The end result is that not only did the sky not fall, it was never falling.

 

[1] P/C Insurers Record $9.3 Billion Q1 Underwriting Gain: AM Best, Insurance Journal, June 12, 2024, https://www.insurancejournal.com/news/national/2024/06/12/779081.htm.

[2] 2023 Underwriting Losses Improve but Persist in US P/C Industry, Insurance Journal, March 26, 2024, https://www.insurancejournal.com/news/national/2024/03/26/766463.htm. 

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