The Impact of Elevated Inflation on US Insurance Companies

Investment Insights

The US inflation is on a rising trend post the COVID-19 pandemic, driven by commodity shock and supply disruption. This elevated inflation remains a cause of concern for insurance companies, especially for property and casualty (P&C) insurers, which experience high claims expenses when inflation rises. With the inflation continuing at record levels, the auto insurance companies are expected to accelerate the pace of rate hikes which is likely to outpace the loss cost trend.

Key Takeaways:

  • The US inflation was at a 40-year high of 8.6% in May 2022.
  • The rising insurance inflation rate is deteriorating the performance of auto insurance companies.
  • The insurance loss ratio is affected mainly by the severity of claims, the frequency of claims, and the change in premium rates.
  • The premium rates are expected to rise by a high-single-to-double digit in 2022.

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