US insurers on track for 7.7% premium growth despite facing brunt of supply issues

US insurers are on track for 7.7 percent growth in net premiums written but will still not hold margins against claims inflation as the combined ratio rises to some 101 percent, an insurance sector think tank has said.

Premium and investment income growth will rise by some 3.2 to 3.4 percent, below the estimated 5.8 percent pace of the broader economic recovery, the study by the Insurance Information Institute indicated.

The gains nonetheless seem strong against the lagging rates of growth for the sectors that drive insurance sales, Michel Leonard (pictured), the institute's senior economist and data scientist, said in an online review of his study.

"You look at what we insure: cars, homes, commercial buildings, and these segments have performed very differently," Leonard said.

Those segments will likely end 2021 with aggregate growth of some 1.1 percent, as they bear the brunt of the supply chain bottlenecks that have restrained growth in the recovery and brought out the surge in headline inflation, Leonard claimed.

Car sales lag, but not for any lack of consumer demand, he claimed. Likewise, homebuilding may have had impressive figures in housing starts, but the gap to housing completions speaks to the economy’s prevailing difficulties with supply.

And the outperformance on growth looks all the more impressive to Leonard as the insurance industry typically lags the economic cycle, Leonard added.

Claims inflation in the US thus runs well above the level of headline inflation that measures broader consumer spending, he noted.

"We estimated that a basket of goods representative of our core replacement costs [gives] about 11 percent year on year inflation," Leonard said.

"As an industry we've grown three-point-something percent, but we did that regardless of our underlying markets of 1.1 percent and inflation above 10 percent," Leonard said.

"That's quite a strong performance."

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