Understanding Today’s Personal Lines Market


Individuals are seeing their Auto and Homeowners insurance premiums rates increase – some more than others, depending on where they are located in the country. Your clients and prospects are asking you why their rates are spiking.

Here is an overview of what is happening in the market to help you communicate with your clients. You can glean the information provided here and draft your communications accordingly.

Auto Insurance

The cost of Auto insurance jumped more than 19% during the year ending in August while overall inflation was 3.7%, according to the Department of Labor. There are several reasons for the higher cost of Auto insurance:

  • Higher repairs and parts replacement costs: The cost of repairing or replacing a car damaged in an accident has jumped sharply due to supply chain delays, parts shortages, and a tight labor market that’s led to rising wages for auto mechanics. According to data from the U.S. Bureau of Labor Statistics (BLS), the consumer price index (CPI) of auto repairs and maintenance increased by 33.2% between January 2019 and July 2023.
  • High cost of used cars: According to BLS data, the CPI for used cars and trucks has increased 39% since January 2019. With the significant increase in used car prices, Auto insurers have had to pay much more for totaled vehicles – in many cases, for vehicles with premiums based on cars valued lower at the start of the policy than when the claim was made.
  • Increased vehicular damage from natural disasters: Fueled in some cases by climate change, severe weather events contribute to higher insurance premiums and not just in states prone to hurricanes or wildfires. Damage to vehicles from hail storms, for example, increased by as much as 24.5% in some states in 2022, according to CCC Intelligent Solutions.
  • Risky driving habits: After the pandemic, safety seemed to take a back seat when people got behind the wheel again. According to the National Safety Council (NSC), 2021 marked the second consecutive year that motor vehicle deaths increased. The U.S. saw an 11% increase in traffic fatalities in 2021 after an 8.3% increase in 2020.
  • Impact of social inflation: While social inflation and nuclear verdicts have been associated with Commercial Auto and Professional Liability claims, personal Auto insurance is beginning to experience similar effects as jury sympathy toward plaintiffs has grown along with the willingness to punish at-fault drivers, according to the Insurance Research Council (IRC). “Despite the role that policy Liability limits play in constraining claim cost growth, very large jury verdicts still affect personal auto claim costs,” says the IRC. “Research from IRC documents growth in claim severity that far exceeds economic inflation, and unpublished analysis by IRC indicates significant growth in the proportion of bodily injury liability claims being paid at policy limits.”

According to the Insurance Information Institute, auto insurers paid $1.12 in claims last year for every dollar they collected in premiums. This year, that ratio is expected to be $1.09.

Homeowners Insurance

The U.S. Homeowners insurance segment reported $6.34 billion in underwriting losses in 2022, marking its third consecutive year with a negative result, according to AM Best. As a result, insurers remain vigilant in assessing their rate needs, pushing for increases when pricing is inadequate.

For example, Farmers and USAA led the pack among the largest homeowners insurers increasing premium rates in 2023. Homeowner policies were up by double digits through September 1, with Farmers’ 14.8% increase only slightly higher than USAA’s 14.7% gain, according to S&P Global Market Intelligence’s RateWatch application. Farmers so far has received approval by state regulators to boost its rates across 43 states, with 28 of them having a calculated weighted average change of greater than 10%, according to S&P. USAA raised rates in 44 states through the first eight months of 2023, with about 60% having a double-digit calculated effective rate increase.

There are many factors contributing to increased Homeowners premiums:

  • Frequency of natural disasters and secondary perils: In the first nine months of 2023, we continued to see weather events wreak havoc on the financial results of the homeowners insurance segment. According to the National Oceanic and Atmospheric Administration (NOAA), we have already experienced 24 billion-dollar weather and climate disasters. These events mark the most disasters of that magnitude on record for a calendar year, totaling more than $67.1 billion in monetary losses. The previous record was set in 2020, with 22 billion-dollar weather and climate events.
  • Higher reinsurance costs: Over the summer, Swiss Re and Munich Re raised their property catastrophe reinsurance premiums in the U.S. by an average of 20% to 50%. These costs are passed on from insurers to homeowners.
  • Higher rebuilding and replacement costs: Inflation has caused building supplies and labor costs to soar – 55% between 2019 and 2022.

Talk to clients well ahead of their renewals, explaining the reasons behind insurance increases so they know what to expect and why. In addition, provide risk-mitigation strategies to help prevent losses and options to lower costs when possible.