A new study from the Vanderbilt Policy Accelerator is intensifying debate over property and casualty insurance pricing, arguing that U.S. insurers are collecting roughly $150 billion more in premiums annually than necessary to cover claims and reasonable operating costs. The report, authored by policy researcher Brian Shearer, contends that declining loss ratios and rising insurer profitability point to structural overpricing rather than solely climate-driven risk escalation.
"Insurers are spending more and more on things like executive compensation, corporate jets, advertising campaigns, dividends, stock buybacks, and profits," Shearer, director of competition and regulatory policy at VPA, said in the report. "The insurance industry is price-gouging Americans, and it's time for insurance commissioners and Congress to put an end to these practices."
According to the analysis, U.S. property and casualty premiums exceeded $1 trillion in 2024 for the first time, while the industry's average loss ratio fell to 61.8%. That means insurers paid approximately 62 cents in claims for every premium dollar collected. By comparison, historical loss ratios during the 1980s and 1990s were closer to 80%. The study argues that restoring an 80% loss-ratio benchmark could return as much as $150 billion annually to policyholders through lower premiums or rebates.
The report acknowledges that climate change and catastrophe exposure have increased claims severity. Vanderbilt cites data showing homeowners' insurance losses rose 40% between 2020 and 2024. However, it notes that premiums increased even faster at 52% during the same period, while underwriting performance remained strong.
Shearer argues that the widening gap reflects increased spending on non-claims expenses, including advertising, executive compensation, stock buybacks, dividends, and corporate perks. The study states that insurers spent $135 billion on "selling expenses" in 2023 alone and that the top 10 insurance CEOs collectively received more than $250 million in compensation over 2022 and 2023.
Not surprisingly, the findings have drawn criticism from industry groups. In a statement to the Associated Press, a representative from the American Property Casualty Insurance Association argued that current loss ratios reflect the impact of large financial losses over the last several years and the actions the industry has taken to ensure they remain financially solid enough to pay future claims.
The Vanderbilt paper proposes several policy responses, including an 80% minimum loss ratio modeled after Affordable Care Act medical loss-ratio standards, expanded rate-review authority for state regulators, public reinsurance mechanisms and tighter disclosure requirements around executive pay and operational spending.
For insurance professionals, the report underscores a growing political and regulatory challenge: balancing actuarial realities tied to climate risk amid mounting scrutiny over affordability, profitability and consumer transparency.
(Photo credit: nito/Adobe Stock)
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