US P&C 2023 underwriting improves, personal lines continue to drag: Triple-I/Milliman

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The U.S. property & casualty (P&C) industry saw its second consecutive year of underwriting losses, with a net combined ratio of 101.6% for 2023. While there was improvement from 2022, personal lines still remained the major driver of unprofitability in 2023.

According to industry underwriting projections by actuaries at the Insurance Information Institute (Triple-I) and Milliman, a collaborating partner, premium growth is expected to further improve underwriting results throughout 2024, with the 2024 P&C industry net combined ratio currently forecast at 100.2%.

Dale Porfilio, FCAS, MAAA, chief insurance officer at Triple-I, commented: “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, explained 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,” he said.

Additionally, Kurtz stated that the 2023 net combined ratio of 87.3 is nearly identical to 2022, and sits as the second lowest in over 15 years​.

He added: “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.”

Furthermore, Donna Glenn, FCAS, MAAA, chief actuary at the National Council on Compensation Insurance (NCCI), explained that the workers’ compensation system is in a period of “extraordinary performance.”

She said: “WC leads the P/C industry with the lowest combined ratio compared to all other lines of business.”

Glenn also noted that 2023 is the 10th consecutive year of underwriting gains and seventh consecutive year with combined ratios under 90.

A recent Triple-I report also showcased how P&C replacement costs in the US are currently rising more slowly than overall inflation and are expected to maintain this trend for the next two years.

Regarding inflation, Triple-I’s Outlook observes a 4.1% year-over-year decline in the Consumer Price Index (CPI).

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