Profitability of the Property/Casualty Insurance Industry

Testimony was given regarding the insurance industry's pricing strategies, profitability, cyclical nature, financial outlook, and general liability difficulties. GAO found that property/casualty insurance companies: (1) use a pricing strategy which allows them to generate cash for investment purposes by reducing their underwriting profit margins; (2) have made a net gain of between $52 and $79 billion in the last 10 years; (3) are experiencing upward-moving underwriting cycles; and (4) will most likely experience a substantial net gain over the next 5 years. GAO also found that the general liability line represents a small portion of the total property/casualty insurance business and that the line for 1984 could have been broken with a 30 percent increase in earned premiums.