AM Best: Personal Auto, Homeowners Markets’ Stabilization Evident Despite Decline in Approved Rate

Why It Matters

Lower rate growth signals restored underwriting profitability, but state‑by‑state regulatory differences mean consumer premium relief will vary, affecting market competition and insurer strategy.

Key Takeaways

• Auto and homeowners rate hikes retreat to pre‑pandemic levels.
• Average auto increase fell 6 points to 3.7% in 2025.
• Homeowners premiums rose 8.3% in 2025, down from 13.5%.
• Insurers achieved underwriting gains, easing pressure for further rate hikes.
• State filing delays cause uneven consumer price relief across regions.

Summary

The AM Best report shows personal auto and homeowners insurance markets stabilizing as rate hikes retreat toward pre‑pandemic levels. After years of steep increases driven by elevated losses, average annual auto premiums fell 6 percentage points to 3.7% in 2025, while homeowners’ approved increases dropped to 8.3% from 13.5% the year before.

Key drivers include a shift from underwriting losses to gains, improved loss‑cost modeling, and more disciplined risk appetite. Insurers leveraged better technology and refined underwriting guidelines, which reduced loss and expense severity across the board. State‑level filing data—over 100,000 filings—revealed that many proposed hikes were rejected, highlighting regulatory friction.

David Blades noted homeowners posted a net underwriting profit for the first time in several years, while Dylan Canna pointed to dramatic 10‑point rate reductions in states such as Maine, Alabama, Idaho and Iowa, contrasted with increases in Nevada and New Jersey. The timing of filings and state regulatory processes created a patchwork of consumer price relief.

The trend suggests insurers will continue moderating rates in 2026, but relief will be uneven as state approvals lag. Companies are likely to focus on selective market entry and refined modeling, while consumers in more restrictive states may see slower price improvements.

Original Description

AM Best Director David Blades and Associate Analyst Dylan Catania discuss a new Best's Special Report that finds 2025 marked a significant shift back to pre-pandemic levels after years of large rate increases to keep up with elevated losses.