Business insurance

Why your premiums are rising and other insurance trends to watch for in 2022


Yesour insurance premiums will likely increase in 2022, if they haven’t already. Amid the COVID-19 pandemic, many insurance companies experienced high claims activity. Extreme weather events, pandemic claims, civil unrest and inflationary pressures have put pressure on the profitability of insurance companies.

However, experts believe insurance companies will rebound as demand increases and businesses adapt to resume profitable operations. Here are three things to watch in the industry as 2022 approaches.

Image source: Getty Images.

1. Global demand for insurance will increase

According to the global insurer Swiss Re Group, the growth of insurance premiums around the world will be above the average for the insurance industry compared to the historical average. Growth will increase as businesses and consumers become more aware of the risks exiting the COVID-19 pandemic.

The company predicts that global insurance premium growth will be 3.3% in 2022 and 3.1% in 2023, beating the industry’s long-term trend. And the insurers agree. According to financial services and consulting firm Deloitte, a third of the 424 insurers surveyed expected their earnings to be “considerably better” next year.

More specifically, sales of commercial insurance should rebound better than those of personal insurance. Higher demand, especially in commercial branches, benefits companies that rely more on premium generation and commercial insurance policies. Chubb (NYSE: CB) and Cincinnati Financial (NASDAQ: CINF) are examples of two companies that could benefit from growing demand, as they derive 43% and 62% of their premiums from commercial policies, respectively.

2. The profitability of insurers will recover after a difficult year

Insurance companies were hit in 2020 and 2021 for a variety of reasons. On the one hand, COVID-19 claims are hurting many insurers, especially those with life insurance business or pandemic-related cancellation policies.

And if those claims weren’t enough, businesses also suffered higher losses from weather-related damage, which was further exacerbated by inflationary pressures. For example, Allstate and Progressive saw high claims in the third quarter of this year due to oversized claims related to damage from Hurricane Ida. Businesses also suffered losses earlier in the year texas frost related.

For Progressive, losses in the first nine months of this year are up 67% from a year ago, reaching nearly $ 1.3 billion. The company had to contend with the pressures of inflation and increased driving activity. Allstate’s losses in the first nine months totaled $ 2.8 billion, up 18% from a year ago due to similar factors.

The Swiss Re group predicts that insurance companies will rebound in 2022 and see their profitability improve. In addition to higher demand, he expects underwriting profitability to recover quickly as insurers respond to rising claims and inflationary pressures.

The person presents a car insurance contract with a pen.

Image source: Getty Images.

3. Your insurance premiums will increase

Businesses will increase their premiums because of the high claims they have seen over the past two years. This is a continuation of a trend in the insurance industry of what experts call a “hardening” of the insurance market. This happens when the number of claims is high and policies are more difficult to obtain. We are in a market that has been getting tougher since 2019 due to these issues. As a result, insurers have the ability to increase rates without losing too much business.

Rate increases have already started. Progressive CEO Tricia Griffith told analysts during her call for quarterly results that it would move to where it underwent policies, eliminating states with a higher number of catastrophes. The company has also called for increases in personal auto rates across the United States. Until the end of the third quarter, higher tariffs went into effect in 20 states and increased 6% on average.

Allstate Personal Lines chairman Glenn Shapiro said the company was taking similar steps in response to inflationary pressures. The company increased tariffs in eight states by almost 7% on average in the third quarter. It plans to increase tariffs in 12 more states by the end of the year.

The flexibility of insurance companies in raising rates is one of the reasons why this is one of the preferred industries to invest in. These companies should see their profitability improve as premiums rise – great news for investors – but not so good for consumers and the businesses that buy these insurance policies.

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Courtney carlsen owns Progressive. The Motley Fool recommends Progressive. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.