Insurers Are Facing More Than One Kind of Inflation

livemint.com:

Inflation comes in many forms, and pretty much all of them are affecting insurers right now. Auto and home insurer Progressive this week reported a big jump in its combined ratio, which measures underwriting losses and expenses as a percentage of premiums, to 100.4% in the second quarter. That is up from 95.6% a year earlier.

This happened despite 18% growth in net written premiums in the quarter, reflecting the efforts that Progressive and other insurers have been making to push through higher rates to customers. That effort, combined with slashing expenses—like how frequently you might see insurance mascots Flo, Mayhem or the Gecko on television—seemed like a promising formula. But the challenges right now feel like they are accumulating faster than the solutions.

Shares of Allstate, Progressive and Travelers are all down or about flat since the start of July, even though banks and financials more broadly have rallied. On the weather front, significant wind, hail and tornado losses accounted for nearly 67 points of loss ratio in Progressive’s property-insurance combined ratio in the second quarter, which was 133.2%, the company reported. Allstate, meanwhile, this week reported a nearly 38-point jump in its combined ratio for homeowners insurance over the first quarter, to 145.3%, which it attributed to catastrophe losses.

This has been an inflated year for natural disasters in the U.S. The number of U.S. potential billion-dollar weather and climate disasters in 2023 through June has exceeded every year tracked by that point besides 2017, with 12 such events so far, according to the National Oceanic and Atmospheric Administration’s National Centers for Environmental Information.