Highlights

From an underwriting profitability perspective, 2017 will likely turn out to be a tough year. The first half of 2017 produced a $4.5 billion underwriting loss. Although some of this is attributable to 2017:Q1 results, the second quarter of 2017 also produced an underwriting loss. And thanks mainly to Hurricanes Harvey and Irma, the third quarter will likely deliver a third straight quarter of underwriting losses, making it especially hard to end the year with an underwriting profit.

By Steven Weisbart, Chief Economist

Price increases relating to auto insurance property claims have been quite moderate recently. Prices for motor vehicle parts and equipment, which affect not only comprehensive and collision claims, but property damage liability as well, rose by 0.5 percent in July 2017 vs. July 2016.

For the property/casualty (P/C) insurance industry in the first quarter of 2017, the financial weather report (compared with 2016:Q1 and 2015:Q1) was cloudy with occasional bright spots. The clouds: higher CAT claims leading to a deteriorating combined ratio; and continued drop-off in investment yield resulting in a profit slump. The bright spots: stronger net written premium growth; and continued growth in policyholder’s surplus.

The CPI-U—the popular measure of inflation, sometimes called headline inflation—rose by 1.9 percent in May 2017 vs. May 2016, before seasonal adjustment.

Price increases relating to auto insurance property claims have been quite moderate recently. Prices for motor vehicle parts and equipment, which affect not only comprehensive and collision claims, but property damage liability as well, dropped by 0.5 percent in April 2017 vs. April 2016.

U.S. economic activity slowed somewhat in 2016 compared to 2015—real GDP rose by 1.6 percent in 2016 vs. 2.6 percent in 2015—and the property/casualty (P/C) insurance industry’s results followed suit. The industry’s $42.6 billion profit for the full year 2016 was 25 percent lower than the $56.8 billion profit for 2015.

The BLS survey of consumer prices for motor vehicle insurance in March 2017 rose by 8.1 percent year-over-year. Of course, many factors other than prices for auto repair—such as the continuing drop in insurers’ investment income, and continuing above-CPI growth in the prices for intensive medical care, and an unusual upturn in the collision rate, which is related to the increase in the number of people employed (and adding cars to rush hour)—likely are affecting these increases.