U.S. personal auto insurers have shown signs of continuing their strong recovery, with AM Best reporting a significant improvement in the first half of 2025. Following a decade-high net profit in 2024, the segment’s direct loss ratio has dropped again, showing that the 2024 rebound may persist through 2025.
Key Highlights
Net Underwriting Income: U.S. auto insurers achieved a net underwriting income of nearly $14 billion in 2024, marking a stark turnaround from three consecutive years of losses. In 2023, the segment experienced a $17 billion underwriting loss.
Net Profit Recovery: For the first time in years, both personal auto liability and auto physical damage coverage turned a net profit in 2024. The segment achieved an overall net profit of $37.6 billion, the highest in a decade. This marks a remarkable recovery from 2022, where combined coverage parts saw a net operating loss of more than $21 billion.
Improved Loss Ratio: AM Best noted that the direct loss ratio in the first half of 2025 improved to 61.2, a significant drop from 67.6 in the first half of 2024 and 77.1 in 2023. This marks an ongoing positive trend as insurers continue to benefit from rate increases and pricing strategies that have strengthened premiums.
Claims Costs on the Rise: While insurers are benefiting from higher premiums, claims costs continue to increase. The average cost per private passenger auto claim rose to $13,000, a 10% increase year-over-year in 2024. Distracted driving remains a significant concern, affecting both loss frequency and severity trends.
Ongoing Industry Momentum: Insurers have been able to successfully raise rates in recent years while managing pricing credits, boosting earned premiums. AM Best also noted a reduction in the number of claims since the pandemic, which has helped keep loss costs from rising dramatically.
Potential Risks: Despite the positive trends, higher tariffs on foreign countries could potentially impact insurers’ claim severity, investment returns, and profit margins. This uncertainty, along with the industry’s response to rising claims costs, could shape the market’s outlook in the near-to-medium term.
The personal auto insurance market is seeing its first sustained profitability in years, helped by premium rate increases, disciplined pricing strategies, and an overall rebound in claims experience. However, challenges persist in the form of rising claims costs, particularly due to distracted driving, and external risks like global tariffs that may add pressure to the industry’s financial performance.
While the property/casualty (P&C) insurance industry has reported half-year underwriting gains estimated at $11.5 billion, the auto segment’s continued profitability is a hopeful sign that insurers may be able to weather rising costs and uncertainties while continuing to provide value to consumers.
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