Homeowners and Auto Rate Trends Normalize
OLDWICK, N.J…Average annual rate increases for U.S. private passenger auto and homeowners’ policies shifted back to pre-pandemic levels in 2025, following years of large increases amid elevated losses in each line of business, according to a new AM Best report.
The average approved rate increase for homeowners’ policies dropped off 5.2 percentage points to 8.3% in 2025, compared with a year earlier. For private passenger auto (PPA), the average approved rate increase was 3.7% in 2025, significantly less than the 9.7% level registered in 2024.
“The improvement experienced by U.S. homeowners’ insurers has been driven by both aggressive rate increases and enhanced pricing sophistication in states that had been generating the most adverse results,” said David Blades, associate director, AM Best. “PPA and homeowners underwriting results have made progress, partly because of a concerted push for premium adequacy.”
State-Level Variability Persists
The report’s underlying analysis is based on a review of Best’s State Rate Filings data, which shows that increased loss frequency and severity across the United States led to spikes in filed rate increases in the personal lines industry in 2023 and 2024. In 2025, there was a significant shift in the magnitude of rate increases following a trend of improving loss ratios for insurers in the prior year, which may signal stabilization after a period of higher rate changes. The improved industry performance was evident from a 9.2 percentage point decrease in the total U.S. homeowners’ industry loss ratio from 74.8 in 2023 to 65.6 in 2025.
PPA lines of coverage experienced similar results but not all states have had the same recent experience. In 2024, PPA insurers generated an underwriting profit for the first time since 2020, when results were skewed because of COVID. However, auto insurance rates in California, Nevada, New Jersey, and New York remained disproportionately high in 2025, despite the sharp decline in the national average. Over the past three years, insurers in most of the states with the smallest average rate changes from 2024 to 2025 have experienced aggregate loss ratios higher than U.S. average loss ratio.
Underwriting and Pricing Implications
“Because insurers in these states experienced more favorable underwriting results in 2025, rate filings in the near future will likely reflect those positive results,” said Dylan Catania, associate analyst, AM Best.
Among some of the reports other key findings:
- The impact of filed rate changes is affected by the dynamics of the approval process and the post-approval rate implementation process, both of which can differ by jurisdiction.
- The magnitude of filed rate changes is reflective of the success, or lack thereof, that insurers have had in effectively aligning premium with risk within their portfolios.
- In recent years, there has been a notable correlation between reduced loss ratios and the subsequent filing of lower-magnitude rate increases, which can provide an indication of favorable near-term underwriting results.
To access the full copy of this Best’s Special Report, titled, “Personal Auto and Homeowners Markets’ Stabilization Evident Despite a Decline in Approved Rate Changes,” please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=364925.
A video discussion about this report is available at http://www.ambest.com/v.asp?v=ambpcplrate526.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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