Triple-I: Current Slowdown in US P/C Replacement Costs Likely Short-Lived; May Grow Faster Than Overall Inflation by 2026
2024年5月10日 - 12:00AM
ビジネスワイヤ(英語)
U.S. property/casualty replacement costs are now increasing at a
slower pace than overall inflation and will likely continue to do
so for the next 24 months, according to the Insurance Information
Institute’s (Triple-I) latest Insurance Economics Outlook.
While this slowdown in cost increases is unlikely to relieve
upward pressures on insurance premiums, especially given
deteriorating underwriting trends and multi-year replacement cost
increases, it may alleviate some pain for carriers in the short run
before overtaking overall inflation again by 2026.
Looking at inflation, the Triple-I Outlook noted that the
Consumer Price Index (CPI) is down 4.1% year-over-year. However,
the CPI increased each month since the beginning of 2024, from 3.1%
in January to 3.2% in February and 3.5% in March. This three-month
trend is not enough to determine whether the year-over-year decline
will reverse course this year. For example, the CPI increased for
three out of 12 months in 2023 (from 3.1% in June to 3.7% in
August, and from 3.1% to 3.3% in November) and still finished that
year down from 8.0% in 2022 to 4.1% in 2023.
As of now, Triple-I expects U.S. inflation to remain flat for
the rest of the year, at around 3.5% with a range of 0.4% above and
below this estimate.
Replacement costs for property (e.g., construction materials,
labor rates) rose 55% between 2019 and 2022, nearly four times the
Consumer Price Index (CPI). It will take 10 years of normal
inflation – defined as 2% per year – to absorb the pandemic era’s
replacement cost increases. P/C replacement costs have grown 1.5%
year-to-date in 2024, below overall inflation of 3.5%.
Lower replacement costs for motor vehicles, especially used
autos, pushed replacement cost increases for commercial auto and
personal auto to the lowest of the P/C lines.
“Triple-I forecasts P/C replacement costs to increase 3.2% by
2026, once again faster than overall inflation, ranging from 2.1%
and 2.9% that year,” said Michel Léonard, Ph.D., CBE, chief
economist and data scientist, Triple-I, in the organization’s May
Outlook.
Léonard noted that this trend will likely reverse in 2026.
“We expect P/C replacement costs to increase by 1.5% in 2024 and
2.5% in 2025, below overall inflation in both years, and increase
by 3.2% in 2026,” Léonard said.
Using Triple-I’s own CPI forecast as the basis for comparison,
U.S. P/C replacement costs are expected to grow below overall
inflation by an average of 1.75% over the next two years. Using the
Fed’s lower inflation forecast as a basis for comparison, this
spread is 0.85%. This is after P/C replacement costs grew at a
multiple of overall inflation during and after the pandemic.
“One caveat to the findings is a threat of resurging inflation
due to geopolitical risks including Russia-Ukraine, China-Taiwan,
India-China, global food prices, supply chain disruptions, trade
wars, and the U.S. elections,” Léonard said.
Triple-I member companies can access the full study on the
Members Only portion of the Triple-I website.
About the Insurance Information Institute
With more than 50 insurance company members — including
regional, super-regional, national, and global carriers — the
Insurance Information Institute (Triple-I) is the #1 online source
for insurance information in the U.S. The organization’s website,
blog and social media channels offer a wealth of data-driven
research studies, white papers, videos, articles, infographics and
other resources solely dedicated to explaining insurance and
enhancing knowledge.
Unlike other sources, Triple-I’s sole focus is creating and
disseminating information to empower consumers. It neither lobbies
nor sells insurance. Triple-I offers objective, fact-based
information about insurance – information that is rooted in
economic and actuarial soundness. Triple-I is affiliated with The
Institutes Risk and Insurance Knowledge Group.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240509830141/en/
New York Press Office, Loretta Worters, 917-923-8245,
lorettaw@iii.org