Insurance will continue to get more expensive

Daily Data: Insurers have been losing money for the last three years

A chart so bad, I find it hard to believe.

---

Everything reads better in your browser or in the app. The footnotes especially, and Random Walk is really leaning into the footnotes. Plus, if you have the app, you can set delivery to “app only” and then my daily barrage will feel less like a barrage. Alternatively, sign up for Weekly Recap only.

If this email was forwarded to you, please click the shiny blue button:

Daily Data

---

Insurance premiums are going up

When it comes to insurance, the goal for the insurer is to collect more in premium than pay in claims.

It’s simple, really.

Premium is the revenue, and claims is the cost. If costs are more than revenue, you lose.

Insurers have a way of measuring their costs (which includes more than just claims) as a percentage of revenue. It’s called a “combined ratio,” and if it’s higher than 100%, the insurer is likely losing money.¹

Insurance has been a money-loser for insurers

So, it was rather striking to see this chart from S&P global which shows that property and casualty (“P&C”) insurers have been running combined ratios north of 100% for basically three years:

Insurers losing money

Personal lines (home, auto, etc.) have been soundly unprofitable since the beginning of 2021, and commercial lines have been flirting with 100% since 2020.

I’m not really sure what explains the divergence between commercial and personal lines, but neither is looking particularly strong.

When you look at “select lines” broken out, you can the total dumpster fire that were all the big name personal lines insurers: