U.S. personal auto insurers saw the segment’s first-half 2025 direct loss ratio fall again from the same two previous six-month periods, indicating that the significant rebound experienced in 2024 may carry over through 2025, according to a new AM Best report.

The Best’s Market Segment Report, “US Personal Auto’s 2024 Underwriting Performance Markedly Improves,” states that the segment’s net underwriting income of nearly $14 billion in 2024 came on the heels of three straight years of underwriting losses, including a $17 billion loss in 2023. Additionally, the two segments of personal auto—auto liability and auto physical damage—turned a net profit in 2024. Unlike the last few years, in which auto liability proved to be the more profitable line, auto physical damage in 2024 achieved a significantly lower combined ratio (i.e., 87.9 compared with 101.2 in 2023) and higher net profits.

“Personal auto physical damage and auto liability combined for a decade-high overall net profit of $37.6 billion, which is the greatest profit for the segment in a decade and represents a huge recovery from 2022, where the two coverage parts combined for a reported net operating loss of more than $21 billion,” said Helen Andersen, industry research analyst, AM Best.

The report states that the segment’s positive momentum has carried into 2025. The first-half 2025 direct loss ratio of 61.2 was a notable improvement over the 67.6 loss ratio recorded in first-half 2024 and superior to the 2023 first-half result of 77.1. With companies successfully achieving rate increases in recent years and being judicious in applying available pricing credits at the same time, earned premiums continue to strengthen as written premium totals rise.

At the same time, personal auto insurers’ claims costs continue to rise, with distracted driving remaining an important concern given the effect on loss frequency and severity trends. The average cost per private passenger auto claim, which has reached almost $13,000, increased by more than 10% year over year in 2024.

“A factor keeping loss costs from ballooning out of control is a reduction in the number of claims since the pandemic, as total loss costs are increasing slower than average loss costs,” said David Blades, associate director, Industry Research and Analytics, AM Best. “An uncertainty going forward is the financial impact of higher tariffs, if imposed on foreign countries, on insurer claim severity, investment returns and profit margins. This unknown could be a critical factor for personal auto insurers over the near-to-medium term.”

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=357925.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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