Insurance industry reports best performance amid consumer search for cheaper rates

The property and casualty insurance industry recorded its best performance in a decade, reporting a net combined ratio of 96.5% in 2024. A net combined ratio below 100% indicates an underwriting profit, signifying that insurers earned more from premiums than they paid out in claims.

S&P Global attributed the significant improvement to better underwriting results in personal lines, including auto and home insurance. In previous years, COVID-19-related supply chain issues, rising vehicle repair and construction costs, and natural disasters led to over $20 billion in annual underwriting losses for 2022 and 2023.

In response to these challenges, insurers raised premiums significantly to improve margins. Over the past two years, home insurance costs rose by 20%, while car insurance rates increased by 42%, according to Insurify data.

Faced with substantial premium hikes, consumers began shopping around for lower rates at record levels. J.D. Power’s 2025 Insurance Shopping Study found that 57% of auto insurance customers actively searched for new policies over the past year, marking the highest rate in the study's history. Similarly, home insurance shopping reached a peak with 6.8% of policyholders comparing quotes in the second quarter of 2024.

For many policyholders, shopping for insurance became essential as some companies pulled back on writing or renewing policies in high-risk areas during 2022 and 2023 due to solvency struggles. Major insurers ceased operations entirely in states most affected by natural catastrophes.

Looking ahead to 2025, despite signs of industry recovery, projected rate hikes are expected due to uncertainty about tariffs and associated rising costs. While auto insurance prices peaked in August 2024 before slightly declining since then according to Insurify data, homeowners' insurance premiums continued rising through the end of last year because home insurers face more elevated losses from severe weather than auto insurers do.

States prone to natural disasters such as California, Louisiana, and Colorado may experience faster-rising premiums this year. For instance, State Farm recently requested an additional 11% rate increase for California home insurance policies shortly after receiving approval for a previous 17% hike due to costly wildfires.

Insurify’s data science team initially projected average car insurance costs would rise by 5% in 2025 but revised this estimate upward to a potential increase of up to 9%, factoring tariffs into account as insurers prepare for rising auto part costs. Similarly revised projections suggest home insurance costs could rise by approximately11%, up from an initial estimate of around8%, driven largely by increased building material expenses due mainly again related largely tariff impacts although Gardner notes domestic sourcing may somewhat mitigate dramatic increases overall ultimately saying “The ultimate effect [of tariffs on homeinsurancepremiums] will likely be less dramatic sinceagreater shareofhomebuilding materialsare sourced domestically comparedtoautoparts.”