US Personal Auto Insurance Sees Profit Gains Amid Legal and Regulatory Challenges

The U.S. personal auto insurance industry reported its strongest underwriting performance since the pandemic, achieving a net combined ratio of 95.3 in 2024. This improvement reflects successful pricing alignment and loss control strategies, resulting in a significant drop in direct incurred loss ratios from 86% in late 2022 to 64% by the end of 2024. Additionally, the sector saw premium growth of 12.8% in 2024, maintaining robust momentum following a 14.4% increase in 2023 and outpacing the broader property/casualty market for the second consecutive year.

Despite these gains, ongoing challenges persist, notably from legal system abuse and a complex regulatory environment. Increased involvement of billboard attorneys has contributed to rising auto liability losses and heightened defense expenses, estimated to add between $76.3 billion and $81.3 billion from 2014 to 2023. Simultaneously, regulatory hurdles have intensified, with rate filing approval times extending by 40% over the past decade and a growing proportion of filings receiving less favorable rate adjustments, potentially restricting market competition and coverage availability.

Industry data also show a divergence in claim trends: while claim frequency remains below pre-pandemic levels, claim severity continues to escalate, resulting in a cumulative pure premium increase of 25 points from 2019 through 2024. These dynamics necessitate careful risk management by insurers to sustain profitable growth amid evolving market conditions.

Historically, the personal auto insurance sector has outperformed the overall U.S. property/casualty industry in combined ratio metrics in half of the years since 2005, underscoring its resilience despite recent pressures. Insurers and regulators alike are navigating these headwinds as they work to balance consumer protection with financial sustainability.

The Insurance Information Institute (Triple-I), a key source for industry insights, represents nearly half of the U.S. property/casualty premiums written, providing data and analysis vital for market participants and policymakers. Its affiliated group, The Institutes, focuses on education and risk management to support insurance industry stability and growth.