Personal auto and allied lines showed double-digit deterioration due to loss costs trends, the threat of inflation, supply chain disruptions and impact of Hurricane Ian in Florida.
The below chart highlights the top P&C carriers ranked by Q3 2022 direct written premium. In the segment further below, we will discuss each line of business in detail.
Please note that in quarterly statements, insurers report direct premiums written, direct premiums earned, and direct incurred losses by lines of business. That allows us to calculate year-over-year and sequential growth and direct loss ratios. These loss ratios are different from the loss ratios reported on a GAAP basis which are net of reinsurance and other adjustments.
Private auto numbers reflect the impact of increased claim severity and frequency
The private auto industry loss ratio deteriorated in the third quarter, both year over year and sequentially, although the gap narrowed. The industry loss ratio was up 10.3 pts to 82.4% on a year-over-year basis. This segment (which makes up nearly 33% of the P&C sector) posted a 5% year over year increase in its direct premiums written, bringing it to $74bn in Q3.
State Farm, USAA, American Family, Allstate and Travelers posted higher-than-average loss ratio deterioration, as shown in chart below. The private auto industry is most affected by the rising inflationary trends, as well as the increased frequency and severity of claims. The year-over-year loss ratios worsened for insurers through all three quarters of 2022. Note the de-minimis shift in Progressive’s numbers. This is in line with our discussion on the company recognizing trends and taking corrective action ahead of its competition.
Homeowners’ reflects Hurricane Ian impact
In the homeowners’ segment, the industry loss ratio increased 7.6 pts to 97.8% compared with a year ago. The top carriers’ loss ratios show improvement, partly due to the severity of the loss from Hurricane Ida in 2021, and comparatively less exposure in Hurricane Ian-affected states. However, some of the Florida-dominant homeowners’ insurers are highly affected by the hurricane-related losses in the third quarter.
Direct premiums written at nine of the top 10 carriers (except Liberty Mutual) saw a year-over-year increase. Travelers and American Family posted the highest year-over-year premium increase, both with 17% growth.
We included a loss ratio analysis of the Florida homeowners’ cohort to reflect the actual impact of Ian on Florida-dominant insurers in Q3. Again, these are direct loss ratios, not GAAP loss ratios, as mentioned above.
General liability losses increased in Q3
Premium for general liability, which includes commercial multiple peril, other liability (claims and occurrence) and product liability (claims and occurrence) grew 6% for the industry to $44.4bn, while the loss ratio deteriorated by 6.0 pts to 65% in the third quarter.
In rankings, Chubb continued to be the nation’s largest general liability insurance underwriter, followed by Travelers and Liberty Mutual. All the insurers in the list grew their premiums, with WR Berkley posting the highest – a 10% year-over-year increase in its premiums in third quarter. Social inflationary pressures and the uptick in loss trends have had a big impact on general liability results.
Commercial auto remains a tough line
The commercial auto liability industry loss ratio deteriorated 7.0 pts to 73% year over year in the third quarter. Except for Progressive and Zurich, the loss ratios of all of the top insurers in the list worsened.
Workers’ compensation continues to perform well in Q3
This segment has consistently posted positive results for the industry, remaining one of the most profitable lines of business.
The industry workers’ compensation loss ratio improved 4.6 pts to 45.1%, while its premiums grew 6% during the quarter. The most recent data shows The Hartford gained the top position, replacing Travelers as number one in the workers’ compensation rankings.
Allied lines was the worst performer in the quarter
The allied lines segment, which includes property damages from wind, hail, sprinkler and water damage, and other miscellaneous perils, had the worst industry loss ratio among major lines in Q3 2022. The industry recorded a loss ratio of 117.7%, a 20.8 pts increase year over year. The last time it was above 100% was in the fourth quarter of 2018, at 100.4%.
This segment shows premium growth of 23% to $13.9bn, an all-time high in any single quarter.
Inland marine saw a minor loss ratio improvement
Premiums for inland marine insurance, which covers goods in transit and modes of transportation, grew 13% in the third quarter. This segment shows minor improvement in its year-over-year change in Q3 loss ratio to 48.6%, down from 49.9% in third quarter of 2021.
After a quarter of improvement, medical professional liability losses worsened in Q3
Medical malpractice coverage saw year-over-year deterioration in Q3, with loss ratios increasing by 1.7 pts to 56.8%. Overall, claims severity in this segment has risen, with juries granting substantial awards in severe cases. Berkshire Hathaway, the largest underwriter in this segment, saw its loss ratio increase to 60.5% from 58.0% last quarter.
In summary, third-quarter results show an increase in loss ratio across all segments except workers’ compensation and inland marine. The private auto and homeowners’ segments continue to be affected by market conditions and Ian.
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