Profits in auto insurance, which were the highest in at least 25 years in 2020, fell precipitously in 2021. Benefits from reduced driving activity and claims incidence during the pandemic were greatly reduced in 2021, along with a significant increase in claim severity due to higher inflation and supply chain shortages, particularly in physical damage coverage.
Following flat growth in 2020, personal lines insurance written premiums in the United States increased by 5% in 2021. Nonetheless, the sector combined ratio (CR) increased to 102.1 percent in 2021, up from an average of 98.3 percent in the previous three years, while the personal auto CR fell sharply to 101.4 percent in 2021, from a record performance of 92.5 percent in 2020.
Although the industry combined ratio fell to 104 percent in 2021 from 107 percent in 2020, the homeowners insurance segment reported an underwriting loss for the fourth time in five years. Catastrophe losses continue to have a negative impact on homeowner results in a variety of jurisdictions. In most states, rate increases and rising premium volume provide opportunities for future growth. Homeowner underwriters continue to face difficulties in insuring to value as property values and construction costs rise.
However, advanced IT and analytics should be used to improve operational efficiency, customer experience, risk assessment, and pricing. Changes in driving habits have increased acceptance of telematics in auto insurance.
Personal lines is the largest segment of the property/casualty insurance market in the United States, accounting for approximately $362 billion, or 51% of total industry net premiums in 2021.