Combined ratio of insurance companies

4,565 Views | 58 Replies | Last: 2 yr ago by KentuckyAg2
rlb28
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2:07p, 8/15/23
AG
There's been much talk on the boards and elsewhere about insurance premiums going up. Some say insurance is a scam, while others aren't understanding what's going on in the insurance world today. I'm an insurance agent and typically when I explain the combined ratio my customers understand. They don't like it, but they understand.

Combined Ratio = (Claim-Related Losses + Expenses) / Earned Premium

Most of the big boys are getting slammed by claims - frequency, severity, inflated cost of materials, personal injury lawyers, etc... Here are a few of the big boys and their combined ration in 2022 (all lines of business).

State Farm - 116%
Berkshire Hathaway (Geico) - 99.70
Progressive - 95.78%
Allstate - 108%
Liberty Mutual - 110%
Travelers - 96%
USAA - 113%
Nationwide - 107%
Farmers - 106%
Kemper - 114%
Texas Farm Bureau - 114%

These companies had a terrible 2021 and ALL of them had a worse 2022.

In the stand alone auto insurance category, for example, State Farm hit 127.56% in 2022 and USAA was 119%.

I can tell you that there needs to be legislation of some kind when it comes to personal injury. Everyone knows someone who had a fender bender and the insurance company paid out $25,000 or more. It's a joke.
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YouBet
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2:48p, 8/15/23
AG
I don't recall the particulars or outcomes with medical tort reform anymore, but I'm guessing we need something similar here, badly.

Too many mouth breathers out there playing the lawsuit lottery.
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62strat
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3:12p, 8/15/23
AG
I decided to file a claim for an auto accident.. it was a fender bender, and if 9 out of 10 people looked at my truck, they wouldn't even know it was in an accident.

Tiny dent above the wheel well, plus a scratch or two.

I regrettably filed a claim (kinda had to I guess since other car had very noticeable damage)

$5k to fix.

That is why insurance companies are having a problem. A small dent and scratch costs $5k to fix.
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Omperlodge
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3:13p, 8/15/23
If you don't have active insurance, at a level acceptable to state laws, at the time of the accident, you can't sue. There was a study that it wipes out nearly half of the dollars paid out. You are operating a vehicle illegally.
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RogerFurlong
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In reply to rlb28 • 3:19p, 8/15/23
The inflated cost of repairs is their own fault. They are difficult to work with so companies charge more because of it. Also insurance is a scam. It's hard to feel bad for them.
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rlb28
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In reply to RogerFurlong • 3:27p, 8/15/23
AG
RogerFurlong said:
The inflated cost of repairs is their own fault. They are difficult to work with so companies charge more because of it. Also insurance is a scam. It's hard to feel bad for them.
This is all wrong.

Increased cost of car parts


Quote:
Motor vehicle repair prices have increased about 20% in the past year, according to the June 2023 consumer price index. There are many reasons for the trend, including long-term and pandemic-era dynamics. Among them are better technology, higher labor costs, more crashes and ongoing issues with supply chains for parts.

Also, the price hikes stem from a shortage of workers and car parts that has sent costs soaring for auto shops, industry experts said. On top of that, the rise of high-tech cars, equipped with features like rearview cameras and traffic sensors, has added cost to even some routine repairs, they added.
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rlb28
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In reply to Omperlodge • 3:34p, 8/15/23
AG
dallasiteinsa02 said:
If you don't have active insurance, at a level acceptable to state laws, at the time of the accident, you can't sue. There was a study that it wipes out nearly half of the dollars paid out. You are operating a vehicle illegally.
I didn't think Texas was a "no pay, no play" state.
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RogerFurlong
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In reply to rlb28 • 3:43p, 8/15/23
No it's not. Insurance companies have to pay more because they are difficult to deal with. Get a price for an insurance claim on a roof and price to pay yourself. Why is the second one lower?
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Ag92NGranbury
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4:48p, 8/15/23
AG
seems like roofing repair has become the latest racket... insurance companies need to crack down on 'marketing rebates' and things that reduce copay

materials cost and new/used car replacement costs are coming down slowly so that should help a bit
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Win At Life
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10:01p, 8/15/23
AG
Insurance companies don't build Taj mahal corporate offices by lowering premiums and paying out claims.
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MRB10
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In reply to rlb28 • 6:18a, 8/16/23
AG
rlb28 said:
dallasiteinsa02 said:
If you don't have active insurance, at a level acceptable to state laws, at the time of the accident, you can't sue. There was a study that it wipes out nearly half of the dollars paid out. You are operating a vehicle illegally.
I didn't think Texas was a "no pay, no play" state.


It's not. Louisiana is the only one I know of with a NPNP statute and there are ways around it. Non-economic damage caps, similar to the Texas Medical Liability Act, would help. Adopting a pure contributory negligence standard would also help.

Those are the only things I can think of shy of a culture shift towards civil litigation.
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Sea Speed
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7:48a, 8/16/23
AG
What were these ratios in say 2019?
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Furlock Bones
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In reply to YouBet • 8:38a, 8/16/23
AG
tort reform has done nothing to reduce insurance premiums. that was fools gold.
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txaggieacct85
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In reply to rlb28 • 8:54a, 8/16/23
AG
Maybe if they would quit paying for new roofs when there's no hail damage it would help.
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txaggieacct85
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In reply to rlb28 • 8:55a, 8/16/23
AG
what about the billions being spent in advertising?
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TxAG#2011
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8:58a, 8/16/23
You hate to see it. Would really suck if State Farm had to sell part of its billion dollar campus.
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planoaggie123
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In reply to txaggieacct85 • 8:59a, 8/16/23
AG
txaggieacct85 said:
what about the billions being spent in advertising?

That is so you can ask them to quote you for insurance and then have them deny you b/c they will no longer cover your areas or so they can increase premiums 60%....
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AgCPA95
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9:08a, 8/16/23
AG
Not contradicting anything the OP stated but just to note a slipping combined ratio doesn't always mean lower or no profits as it doesn't account for investment income.

For example, Travelers had $3 billion of net income in 2022 on revenues of $37 billion. Insurance companies make billions on investing your pre-paid premiums before claims are paid out.
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rlb28
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In reply to txaggieacct85 • 9:26a, 8/16/23
AG
txaggieacct85 said:
Maybe if they would quit paying for new roofs when there's no hail damage it would help.
That all has to do with litigation. It's long and complicated, but I'll post a link and some excerpts that explains how bad it gets with litigation.

Insurance litigation
Quote:
Since 2009, storm-chasing lawyers have used natural disasters as opportunities to line their pockets at the expense of all Texans. By exploiting Texas' consumer protection laws, storm-chasing lawyers created a lucrative business model that led to an explosion of lawsuits statewide.

Not only was this litigation unnecessary to resolve many property owners' insurance claims, but it nearly bankrupted the Texas Windstorm Insurance Association (TWIA) and led private insurers to raise insurance rates and reduce or stop offering coverage in parts of Texas.

Quote:
Ultimately, a small group of lawyers filed thousands of lawsuits alleging that TWIA failed to pay claims fully and on time. Many of the lawsuits were filed years after the storm and alleged damages that had never before been reported to TWIA. This lawyer-driven litigation cost TWIA billions of dollarsfar more than it should have paid for legitimate claimsnearly bankrupting TWIA.

Quote:
In 2011, the Texas Legislature passed legislation to save TWIA. House Bill 3 both revamped the funding mechanism for TWIA and created a new process to resolve disputed claims. This new process was designed as a disincentive to stop lawyers from recruiting clients to sue TWIA after a future hurricane.
Then...

Several of the same lawyers who pursued abusive TWIA lawsuits after Hurricane Ike turned their attention to private insurers in late 2012, using the TWIA litigation model after large-scale weather events like hailstorms and windstorms. The litigation model followed a cookie-cutter pattern.

Quote:
Using this litigation model over a five-year period, storm-chasing lawyers filed nearly 40,000 lawsuits in Texas. The Texas Department of Insurance reported a 1,400 percent increase in weather-related lawsuits from 2012 to 2016.
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MRB10
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In reply to Furlock Bones • 10:13a, 8/16/23
AG
I underwrite hospitals country wide and insurance costs for Texas based systems, compared to states with similar loss costs and no damage caps, are very very different.
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MRB10
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In reply to AgCPA95 • 10:25a, 8/16/23
AG
Investment income is one of the only reasons these companies can stay in business. When you're paying 95-110 cents out for every dollar collected it's an absolute necessity to earn a return on that dollar while you have it.

It's super easy to paint insurance companies in a negative light because their product only pays when someone ****s up, or someone's facing a 5 figure bill on their house because of an act of god. This means at least one person in every claim scenario is already frustrated and the chance of everyone walking away 100% satisfied is nearly impossible.

The folks on here making good money can possibly afford to self insure. The other 99% of the country isn't that fortunate in the litigious environment that we live in. Most folks would be ruined if they made a mistake behind the wheel and had to shell out of pocket for a settlement, or had to pay $10-20k for a roof every few years, or had to pay to repair the new car they bought last year.

Insurance companies play a vital role in our society despite the attitudes of many on this board. Heaven forbid they try and make a profit while doing it.

/soapbox
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TxAG#2011
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12:21p, 8/16/23
Insurance company defense force is a good one. These guys have enjoyed gouging the customers for decades and now that the margins have slimmed a bit? Well, we should just be thankful they are here to help us.
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rlb28
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In reply to TxAG#2011 • 12:43p, 8/16/23
AG
Not sure about gouging for decades.

But there's nearly a crisis right now. Ask Florida, where companies pulled out of the homeowners market and their rates doubled and tripled. State Farm recently pulled out of California and Florida. Farmers left both states, too, if I'm not mistaken.

TWIA recently voted not to take a rate increase even though analysts told them they were 20% below where they need to be.

Margins haven't just slimmed a bit. They've skyrocketed past profitability. When insurance giants like State Farm and Farmers pull out of a state entirely you can see trouble on the horizon.
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txaggieacct85
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1:06p, 8/16/23
AG
Enter SageSure and SafePort Insurance
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rlb28
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In reply to txaggieacct85 • 1:27p, 8/16/23
AG
txaggieacct85 said:
Enter SageSure and SafePort Insurance
We haven't written a SageSure policy in months. Rates are outrageous on the Texas coast.
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txaggieacct85
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In reply to rlb28 • 1:30p, 8/16/23
AG
rlb28 said:
txaggieacct85 said:
Enter SageSure and SafePort Insurance
We haven't written a SageSure policy in months. Rates are outrageous on the Texas coast.
I use them for two investment properties in Texas, one in Bryan and the other in Spring and both are the cheapest premiums I could find.
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CC09LawAg
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In reply to rlb28 • 1:39p, 8/16/23
rlb28 said:
I can tell you that there needs to be legislation of some kind when it comes to personal injury. Everyone knows someone who had a fender bender and the insurance company paid out $25,000 or more. It's a joke.
Do you believe that insurance companies play fairly with claimants when it comes to claims presented by people that are not represented by attorneys and that they pay a fair value for the medical bills and injuries presented?
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rlb28
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In reply to CC09LawAg • 1:59p, 8/16/23
AG
CC09LawAg said:
rlb28 said:
I can tell you that there needs to be legislation of some kind when it comes to personal injury. Everyone knows someone who had a fender bender and the insurance company paid out $25,000 or more. It's a joke.
Do you believe that insurance companies play fairly with claimants when it comes to claims presented by people that are not represented by attorneys and that they pay a fair value for the medical bills and injuries presented?
It would be complete conjecture on my part to answer that. I've never dealt with a bodily injury claim that wasn't represented by an attorney.

We've been in business 44 years and to my knowledge we've never had one of our customers or another claimant complain about the amount of money they received in an injury claim.

Conversely, we've had many customers complain that the other party "got $75,000 for that fender bender in the parking lot."

I have tons of stories, but here's two I know best:

- My office assistant was involved in a small wreck in Houston on 610. Police were called, reports were made and both parties drove off.

She received dozens of calls from lawyers, paralegals, pain management clinics, chiropractors, etc... trying to get her to the doctor, hospital or pain management clinic. I sat in on all the calls on mute as I listened to her tell everyone of them she wasn't injured - not a scratch. They all sounded like a used car salesman. This went on for 2 weeks.

- My friend's daughter took her foot off the brake and rolled into an SUV at a stop light. The trailer hitch on the SUV cracked her car grill. The SUV was from Brenham ISD and six people - two teachers and four students got out. Nobody was hurt at the scene but they exchanged insurance information.

A month later my friend called and said he was informed that all four students received $25,000 for injuries. Total BS.
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topher06
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2:22p, 8/16/23
I think insurance companies are doing just fine, but we do need to do something about the slime of the legal world (PI attorneys). Should have to pay for the defense if they lose.
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txaggieacct85
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2:34p, 8/16/23
AG
So my 21 year old daughter got into a wreck last year. She barely hit the car in front of her and the driver of that car panicked and turned into the left lane from the middle lane. A grown 50 something man. He got hit by a truck that I'm sure was speeding. So the driver and passenger of that truck was an illegal alien couple.

No drivers license, no insurance, no anything.

Ambulance chasing lawyer, teasip to make matters worse, sues my daughter on behalf of the illegals.

Even though my daughter did not touch their truck.

After many months the case was settled for something like $6,000 with Allstate as our carrier.

Whole thing was a joke. They claimed something like $30,000 in medical bills and sued for $1 million.

I went to help my daughter and saw both illegals and neither one was injured. They were more scared they would get charged with no license or insurance or registration
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MRB10
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In reply to txaggieacct85 • 3:11p, 8/16/23
AG
I believe there is a place for personal injury attorneys but most, like the ones in the scenarios above, are pond scum.

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Bpriefert
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11:41p, 8/16/23
Insurance companies (all of them - auto, home and health) are the modern day tax collectors. Leeches.

Blah blah, tough year of claims, blah blah, Covid, blah blah inflation, blah blah.
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rlb28
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In reply to Bpriefert • 7:03a, 8/17/23
AG
Except you don't have to buy insurance
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aggiebrad94
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In reply to rlb28 • 8:35a, 8/17/23
AG
rlb28 said:
Except you don't have to buy insurance
'splain
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Captain Winky
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8:50a, 8/17/23
I don't know if I am just being more observant, but it seems like the number of PI lawyer billboards has exploded. It seems like every other billboard is now an advertisement for one of them.
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