Improved loss ratios, sturdy premium development, and decrease retention charges characterised the U.S. auto insurance coverage trade in 2024, in accordance with LexisNexis® Threat Options’ 2025 U.S Auto Insurance coverage Tendencies Report.
The report exhibits that, “whereas various insurers returned to profitability because the market softened,” the market was characterised by “report ranges of coverage purchasing and switching, legal professional illustration, claims severity, and rising driving violations.”
Charge will increase over the previous two years helped U.S. insurers handle profitability points, the report mentioned. Premium charge will increase are starting to ease, rising 10 p.c in 2024, in contrast with a 15 p.c hike in 2023, as market situations soften. Insurer profitability is bettering, with direct written premiums rising 13.6 p.c, to $359 billion, and incurred loss ratios stabilizing, enabling some carriers to pursue development methods and file for charge decreases.
LexisNexis Threat Options additionally notes that tariffs might issue into how insurers think about charge in 2025. Whereas the market wouldn’t count on the magnitude of exercise seen between 2022 by 2024, tariffs, in the event that they stick, might set off a ripple impact of average charge will increase with implications throughout the trade.
Different developments recognized within the report embody:
- Bodily damage claims severity jumped 9.2 p.c, and property injury severity climbed 2.5 p.c, 12 months over 12 months. In distinction, collision severity fell 2.5 p.c for a similar interval.
- All driving violations elevated 17percent and driving violation charges throughout the US surpassed 2019 ranges.
- Coverage purchasing reached an all-time excessive, with greater than 45 p.c of insurance policies in pressure shopped not less than as soon as by year-end.
The report additionally famous that electrical automobile (EV) transitions are introducing new dangers, as drivers shifting from inside combustion engine autos to EVs skilled a 14 percet rise in declare frequency.
“Auto insurers proceed to navigate a dynamic market,” mentioned Jeff Batiste, senior vice chairman and normal supervisor, U.S. auto and residential insurance coverage, LexisNexis Threat Options. “The mixture of the market softening and a return to profitability presents a possible new chapter for the trade as insurers encounter a shopper base that’s extra prepared than ever to buy offers.”
Document ranges of auto coverage switching translated to 2024’s new coverage development charge of 17.7 p.c 12 months over 12 months. It additionally added momentum to the continued buyer retention decline throughout the trade.
Since 2021, retention has decreased 5 proportion factors, to 78 p.c, leading to a 22 p.c improve in coverage churn, the report says.
“Traditionally, dropping even one proportion level is important,” it says. “Nonetheless, in opposition to a backdrop of heightened ranges of purchasing and switching exercise, insurers might wish to deal with their retention methods, particularly when long-tenured clients are hitting the market.”
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