Profitability of the Property/Casualty Insurance Industry

GAO provided background information on: (1) property/casualty insurance company pricing strategies; (2) a financial overview of the industry; and (3) the financial impact of certain liability insurance lines. A property/casualty company derives its income from underwriting and investment gains. In past years, investment gains have exceeded underwriting losses by a fairly wide margin; however, in recent years the gap has narrowed until 1984, when underwriting losses were $19.4 billion, while the investment gain was $17.9 billion. GAO noted that the industry is subject to profit and loss cycles and that the data indicate that, over the past 10-year period, the industry has been profitable. In recent years, the profitability has been lower; however, the industry projects increasing premium volumes and more favorable prospects for the next few years. Medical malpractice and general liability insurance represent a relatively small portion of the industry. For certain companies that specialize in these lines, the percentage of losses will likely be high.