“The insurance industry is expected to grow in 2021 yet underperforms overall US 2021 growth,” said report author and Triple-I vice president, senior economist and data scientist Michel Léonard, PhD, CBE.
According to the report, the US GDP is projected to grow by 5.8% this year. By comparison, Triple-I has estimated that the insurance industry’s rate of growth will be somewhere between 3.2% and 3.4%.
Léonard, who also serves as the head of Triple-I’s economics and analytics department, added that in 2021, the insurance industry’s performance is “constrained by its ties to industries with growth rates significantly below and inflation rates significantly above the US rates overall.” He noted that inflation will measure at 4% by the end of this year, but will be higher for items that directly impact insurers, such as cars, auto replacement parts, and construction materials such as lumber.
The other challenge insurers are facing as 2021 comes to a close is a projected year-end combined ratio of 101, Triple-I said. This means auto, home, and business insurers are likely to spend $1.01 this year on claims and expenses for every $1 collected in premiums.
US insurer performance might fall a little short compared to the nation’s GDP growth, but in global terms, they are outperforming the world’s largest insurance markets. Triple-I expects a 7.7% increase this year in US net premiums written from 2020. Investment income has also been identified by the report as a major source of revenue for US insurers by the report, largely responsible for a 6.5% year-over-year increase in policyholders’ surplus.
Triple-I is anticipating the surplus to hit somewhere near $900 billion.
Léonard noted that the supply chain disruptions, labor shortages, and inflationary pressures in 2021 led to disagreement among economists.
“I’ve never seen a situation, and neither have most of my colleagues, where credible economists that traditionally look at the world in the same way are so spread apart in terms of their forecasts,” he said.