P&C Insurers Logged Their Best Year in a Decade While Consumers Chased Cheaper Rates | Insurify

The industry reported a net combined ratio of 96.5% in 2024. A net combined ratio of less than 100% indicates an underwriting profit, meaning insurers made more from premiums than they paid in claims.

Better underwriting results in personal lines, including auto and home insurance, drove the drastic improvement, S&P Global reported.

COVID-19-related supply chain issues, rising vehicle repair and construction costs, and natural disasters fueled more than $20 billion in annual underwriting losses in 2022 and 2023.

In response, insurers significantly raised premiums to improve margins. The cost of home insurance increased by 20% over the past two years, and car insurance rates surged by 42% in the same period, according to Insurify data.

Consumers policy shopped in record numbers as premiums skyrocketed

Faced with major premium hikes, drivers and homeowners have begun shopping around for lower rates in record numbers.

Over the past year, 57% of auto insurance customers actively shopped for a new policy, according to J.D. Power's 2025 Insurance Shopping Study. That's the highest shopping rate in the study's 19-year history.

Home insurance shopping also hit a high, with 6.8% of policyholders comparing quotes in the second quarter of 2024, a J.D. Power survey found.

Insurance shopping was a necessity for many policyholders. Struggling with solvency, some home and auto insurance companies pulled back on writing or renewing policies in high-risk areas in 2022 and 2023. Major insurers halted business entirely in the states most ravaged by natural catastrophes.

What's next? Projected rate hikes in 2025, despite signs of industry recovery

Policyholders can typically expect slower rate increases when underwriting is broadly profitable. But 2025 could buck that trend due to industry uncertainty about tariffs and associated rising costs.

Auto insurance prices peaked in August 2024 and have dipped slightly since, according to Insurify data. Homeowners insurance premiums continued to rise through the end of last year because home insurers see more elevated losses from severe weather than auto insurers, said Chase Gardner, data insights manager at Insurify.

States that are vulnerable to natural catastrophes, like California, Louisiana, and Colorado, will likely see the fastest-rising premiums in 2025.

State Farm, for example, recently requested an additional 11% rate increase for California home insurance policies just days after the Department of Insurance approved a 17% hike. The insurer cited the costly 2025 Southern California wildfires in its request.

Insurify's data science team initially projected average car insurance costs would rise by 5% in 2025. With tariffs factored in, rates could increase by 9% as insurers brace for the rising cost of auto parts.

Similarly, Insurify projects home insurance costs will rise by 11% this year, up from its initial 8% projection, as tariffs increase the cost of building materials.

"The ultimate effect [of tariffs on home insurance premiums] will likely be less dramatic, since a greater share of homebuilding materials are sourced domestically compared to auto parts," said Gardner.

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