U.S. P&C Insurance Combined Ratios Hit Decade Low Amid Rising Costs and Digital Shift

The U.S. property and casualty (P&C) insurance industry achieved its strongest underwriting performance in over a decade in 2024, with the net combined ratio improving to 96.5%, the best since 2013.

This progress is largely driven by significantly improved results in personal lines including private auto, homeowners, and farmowners insurance, where the net combined ratio dropped about 10 percentage points year-over-year to 96.7%.

The private auto sector saw especially notable recovery from its 2022 performance woes, with the net combined ratio falling to 95.3% in 2024 from a peak of 112.2% in 2022, helped by substantial rate increases. Inflationary pressures remain a challenge, however, with auto insurance costs rising 11.1% year-over-year according to the Bureau of Labor Statistics, influenced by factors such as increased vehicle complexity, more severe crashes, medical inflation, and legal verdicts.

Repair costs are also escalating due to tariffs on imported auto parts, which constitute a significant portion of total repair costs and are expected to drive premiums higher this summer. The average number of replacement parts per repair has increased by 15% over five years, adding complexity and cost to claims processing. Parallel to these cost pressures, consumer behavior is shifting markedly toward digital engagement, with 57% of auto insurance customers shopping for new policies in the past year—the highest rate measured by J.D. Power. Nearly half of policy purchases now occur online, underscoring the importance of digital quoting and policy management capabilities for insurers to compete effectively in this environment.

The ongoing regulatory scrutiny on claims practices, highlighted by a recent Senate subcommittee hearing, adds to the evolving landscape insurers must navigate. Overall, these dynamics reflect a P&C market adapting to inflation, regulatory focus, and digital transformation, with underwriting profitability improving but cost inflation continuing to pressure rates and claims handling.