Risk Benchmarks Research 2019 Report: 
Property / Casualty Industry Insights

By Thomas Hettinger, Managing Director,
Strategic Advisory, Guy Carpenter & Company

A broad array of insights are identified in Guy Carpenter’s Risk Benchmarks Research 2019 report, the newest component of our ongoing insurance benchmarks research project, which accumulates and interprets US P&C insurance statutory financial data, through a lens of robust analytics on risk and performance. This year’s report discerns market trends to help clients in their strategic decision-making and review of critical metrics. Results by segment and business model emphasize the pressure companies are under to generate profitable returns.

Today, companies need to evaluate their business models around distribution, underwriting, pricing, and risk mitigation to separate from their competitors. Higher loss cost trends in several long-tail lines, and accumulation of losses from recent extreme weather events, are forcing carriers to reassess risk. Increased exposure to catastrophes and competition in personal auto, system and technological upgrades and outlays, medical inflation and social inflation are creating both challenges and opportunities.

A deeper dive into the US insurance industry results over the past three years shows opportunities around pockets of volatility and profitability at a refined segment level. Each segment has had to wrestle with specific challenges in managing the capital needed to support risk. Some notable examples include: over the past three years, Large Mutuals have experienced catastrophe influences on homeowners in addition to significant competition in personal auto that began to shore up in 2018, due to their use of advanced analytics strategies following four years of poor results. Western Regionals felt the pain of wildfires – a once underestimated catastrophe peril. Large Commercials had to manage across the volatility of primary and excess liability covers that have come under pressure from rising social inflation and a surge in attritional large property losses. These trends have been particularly hard felt among non-admitted writers.

Some of the Key Highlights of the Research

Insights on Commercial Lines

Product liability insurers face liability claims challenges as trial lawyers ramp up around new mass torts including opioids, e-cigarettes, talc, and Round-Up. This is apparent from some of the recent judgments and settlements against the manufacturers of opioids. How this migrates through other insurers is unknown as of yet.

These emerging product liability exposures coupled with social inflation, will likely impact industry loss costs. This year’s study suggests that liability lines redundancy in past reserves has grown thin as industry reserves remain close to previously booked levels for the last four accident years. Given the recognition lag in emerging products liability, the industry is likely posed to experience some adverse development.

The workers compensation sector has continued to work through effective change management and is now into its sixth year of nominal underwriting profit due to initiatives around loss control, return to work, nurse interaction, and prescription management. Our analysis illustrates how the nationals and largest carriers have started to separate themselves from the regionals as they leverage technology and scale in their pricing, claims, and underwriting disciplines. Direct written premiums for workers’ compensation declined slightly in 2018 to just over USD 57 billion.

This segment is not without challenges, including potential systemic risks that could shift the footprint for all carriers. It is managing through an opioid epidemic impacting claims duration and the number of viable bodies available in the workforce. Other future systemic challenges to be considered include the impact of marijuana legalization, increased deployment of automation and the resulting displacement of traditional workers, the number of people with and without health insurance, and the impact of a recession and potential for morale hazard.

Commercial auto liability continues to search for solutions as it steadily drains earnings for many and surplus for some. Forty of the top 100 commercial auto writers experienced combined ratios in excess of 110 percent in 2018. Fifteen of those companies had combined ratios in excess of 120 percent. While the industry has seen some improvement in combined ratio in total, dropping to 105 percent after multiple years in excess of 110 percent, rate changes have been met with adverse selection as across-the-board increases drove the marginally better risks into self-insured configurations or to companies with better segmentation plans. For instance, Progressive’s strong entry into the sole proprietor and small fleet segment of the market will sound an alarm for the unsophisticated insurers and put greater emphasis on creativity and analytics.

We have found that carriers offering more risk management capabilities to their commercial insureds can differentiate from those insurers offering only a traditional insurance product and may therefore be able to avoid competing purely on price, while at the same time, helping to manage losses.

Trends in Personal Lines

Homeowners reverted to its historical trend with combined ratios in excess of 100 percent due to another round of catastrophe events affecting the United States. With the increase in personal auto competition, personal lines-dominant insurers face increased speculation on how to develop long-term prospective profits. The study found that personal lines writers experienced a reversal in 2018 from the previous four years as auto bounced back into profitable territory. Diversification of risk and reinsurance utilization remained important considerations, based on the past five years of results.


With the initiation of a flip in profitability between homeowners and personal auto, an argument can be made for building out a diversified portfolio. More carriers are looking to balance their portfolios with a small commercial book that is also under competitive pressure. Demands around predictive modeling solutions will grow as the top personal lines carriers push on their in-house analytics. Progressive, GEICO and USAA, for example, substantially lower expense ratios through their direct operations. In fact, other major carriers continue to build out direct solutions to help offset this challenge.

The study recognized that capital consumption continued to be front of mind, as personal lines writers search for consistent profit while managing volatility due to price competition and catastrophes losses from recent hurricanes and wildfire events. 

Overall, the industry’s need to address challenges in the face of competition and growth will continue. Insurers will be tested in picking their opportunities with care to maximize their potential for success. Benchmarking and use of predictive analytic models will be foundational to advancement.