US P/C insurers' expenses down despite big losses

Key findings of new special report revealed

By Jonalyn Cueto

Jan 04, 2024 Share

A new report has revealed property/casualty (P/C) insurers in the US have managed to bolster bottom-line financial results despite catastrophe-related and secondary peril losses.

The US P/C industry has reduced its underwriting expense ratio by 2.6% to 25.7% in 2022, AM Best said in their special report titled “P/C Insurers Cut Expenses in the Wake of Deteriorating Personal Lines Results.” The agency notes that the cut in costs came amid increases in commission and brokerage expenses.

The expense savings have been shared between insurers and agents and brokers, which are receiving an additional 1% of direct premiums written compared with 10 years ago. The report said savings on general expenses and other acquisition expenses have also been passed along to agents and brokers.

“In contrast, the commercial lines have improved significantly and performed better than the P/C industry overall,” said Christopher Graham, senior industry research analyst at AM Best. “Insurers have been able to cut their expense ratios in taxes, licensing, and fees, which they have also passed to the agents and brokers.”

However, the report said the commission and brokerage expenses were “relatively flat” for personal lines business.

The comparison of commission and brokerage fees paid shows insurers pay more of these toward homeowners’ insurance than on personal auto or workers’ compensation, indicating the higher risk and value in this segment.

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