"The growth in premiums that you're seeing is a reflection of a very difficult operating environment," says Tim Zawacki, principal insurance research analyst with S&P Global Market Intelligence. (Credit: chaiyapruek/AdobeStock)
At first glance, the substantial, double-digit growth exhibited by several of the top P&C insurance groups and companies between 2021 and 2022 would seem to signal a robust industry immune to the inflation-driven belt-tightening that's rattled so many other businesses and individuals.
But look closer, says Tim Zawacki, principal insurance research analyst with S&P Global Market Intelligence, and you'll find that many of the insurance organizations highlighted in his company's annual list of Top 100 Insurance Groups and Companies have instituted notable rate increases.
"The growth in premiums that you're seeing is a reflection of a very difficult operating environment," Zawacki said in a recent interview. "Some businesses may think of rapid growth as a sign of strength. But in insurance, it's really more about catching up to loss costs."
This gray area with regards to growth is revealed in year-over-year combined ratios. Most of the top insurers reported high combined ratios in 2022, which is a sign depressed profit margins.
"The kinds of inflation that the industry is facing has been multifaceted," Zawacki continued. "It's not just that used car prices are at record [highs]. It's that the severity of crashes has gone up. So you're looking at more expensive claims, more litigation, more significant injuries, and higher levels of fatalities."
He added that these statistics only represent results in the U.S. Looking globally, insurers and reinsurers are under even more inflationary pressure as they respond to catastrophic natural disasters. This is another reason insurers are addressing higher costs with rate increases along with changes in risk appetite.
"Insurers are responding very forcefully with rate increases," Zawacki concluded. "That is manifesting itself, in some cases, in double-digit premium growth."
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