US personal auto insurers continued to show progress in the first half of 2025, as the segment’s direct loss ratio declined for the second year in a row, according to a new AM Best report, with the results suggesting that the strong recovery seen in 2024 is extending into this year.
The segment recorded nearly $14 billion in net underwriting income, reversing three consecutive years of losses, which included a $17 billion shortfall in 2023.
Both auto liability and auto physical damage lines were profitable in 2024. Notably, auto physical damage stood out, achieving a combined ratio of 87.9 compared with 101.2 in 2023, delivering higher net profits than liability for the first time in several years.
“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,” commented Helen Andersen, Industry Research Analyst, AM Best.
The segment has carried that strength into 2025. The direct loss ratio for the first half of the year fell to 61.2, improving from 67.6 in the same period of 2024 and 77.1 in 2023. AM Best attributes this trend to companies successfully implementing rate increases while carefully managing pricing credits, leading to stronger earned premiums and growing written premium totals.
However, rising claims costs remain a challenge. Distracted driving continues to push up both claim frequency and severity, with the average cost per private passenger auto claim climbing to nearly $13,000 in 2024—a year-over-year increase of more than 10%.
“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.”
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