The financial experts at McKinsey & Company recently took a long, hard look at the impact of inflation on insurance and insurers. McKinsey says last year inflation has hit loss costs for property and casualty insurers for $30 billion.
And 75% of that number came via losses in personal lines.
The article talking about inflation and insurance is titled, Countering inflation: How U.S. P&C insurers can build resilience. In it, McKinsey partners Kia Javanmardian, Sebastian Kohls and Fritz Nauck, and senior expert Gavin McPhail say it is up to insurance executives to respond as quickly as possible to the hit inflation has on profits.
The response — they say — needs to come in pricing, underwriting and claims, and other areas.
The biggest hit was on personal lines. Those lines of insurance lost close to $22 billion over historical average lost costs in 2021. Combined, workers’ compensation, commercial multiple peril and commercial auto lost $8 billion.
A big reason for the jump in personal auto is the high price for parts and equipment. Supply chain disruptions also played a big part of the rise.
Inflations impact on P&C loss costs by line (2021):
Personal auto — $13.9 billion
Homeowners — $7.9 billion
Workers’ compensation — $3.9 billion
Commercial multiple peril — $2.3 million
Commercial auto — $2 billion
Total — $30.0 billion
Inflation impact on P&C loss costs by line and percentage (2021):
Personal auto — 8.6%
Homeowners — 13.4%
Workers’ compensation — 16.0%
Commercial multiple peril — 9.5%
Commercial auto — 6.6%
Source link: Insurance Journal — https://bit.ly/3CZmrQ7
Inflation: The Impact on Insurers
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