It turns out that the coronavirus pandemic hasn’t adversely affected U.S. personal lines insurance all that much. In the short term, the sector has continued to do well and is poised to produce underwriting profits for 2020, Fitch Ratings said in a new report.
One of the big drivers of personal lines gains, is, in fact, pandemic-related: a reduction in vehicle usage due to shutdowns and stay-at-home orders.
“A reduction in vehicle usage amid the coronavirus pandemic has lowered risk exposures and claims frequency for personal auto insurers that boosted near-term underwriting performance,” said James Auden, managing director, Fitch Ratings.
He added, however, that the premium returns and rebates stemming from lower vehicle usage could create challenges once the pandemic retreats.
“Recent premium returns and rebate actions do not fully offset recent lower claims experience, but will foster price competition that may lead to poorer performance when economic and claims activity normalizes, Auden said.
According to Fitch, personal lines posted a 98.7 combined ratio in 2019, less than 1 percent better than the 99.4 combined ratio produced the year before. For personal auto, at least, Fitch expects the combined ratio to improve by a few points, which would drive the overall results for the broader personal lines sector.
The top personal auto insurers have generally remained static, year-over-year, but a few have shown movement. As Fitch noted, the top 10 auto writers controlled about 73 percent of the market at the end of 2019, with State Farm, the continued leader, continuing to see some declining market share as competition grows. State Farm’s auto market share dipped from 19 percent in 2014 to 16 percent in 2019, where it booked $40.7 billion in net written premium. Allstate, the fourth largest auto insurance underwriter, has had flat market share growth but its planned acquisition of National General should boost it higher. In 2019, its net premiums written surpassed $23.4 billion, up more than 24 percent between 2014 and 2019.
Berkshire Hathaway’s GEICO (number 2) should tie with State Farm for first place by 2021, Fitch said, and Progressive (number 3) should move to the number 2 market position by 2023. Berkshire Hathaway reported its net written premium for auto insurance grew more than 69 percent between 2014 and 2019 to $35 billion, with Progressive growing past 87 percent over the same period, to more than $30.6 billion in 2019.
One downward trend worth noting: Nationwide, which scored 8th in terms of market share, though its net premiums written dipped 14 percent from 2014 to 2019. For 2019, its net premiums written were $6.2 billion.
For homeowners insurance, the top 10 underwriters covered 64 percent of the total U.S. market share in 2019.
State Farm remains on top with a 20 percent market share, but its premium growth is slower than many of its peers. State Farm booked $18.4 billion in net written premium in 2019, a growth of 6 percent from 2014 to 2019. Travelers, at number 6, reported $4.1 billion in net written premium for last year, capping net written premium growth of 27 percent from 2014. Chubb saw some gains, too, in the number 9 homeowners slot. The carrier booked nearly $2.6 billion in homeowners net written premium for 2019 and a 2.8 percent market share, up 22 percent from 2014.
Fitch Ratings’ full report is “U.S. Personal Lines Market Update.”
Source: Fitch Ratings