Americans are wildly overpaying for property insurance, a new study from Vanderbilt University claims.
It turns out insurers have been charging more and delivering less on property and casualty insurance policies over the last few years. Meanwhile, they’re spending nearly $400 billion per year on corporate perks, excessive executive compensation, stock buybacks, private jets, and the like.
“The insurance industry is price-gouging Americans, and it’s time for insurance commissioners and Congress to put an end to these practices,” said Brian Shearer, director of competition and regulatory policy at the Vanderbilt Policy Accelerator and author of the study.
Insurers see lower loss ratios, charge higher premiums
According to the study, insurers are seeing much lower loss ratios than in years past. In the 1980s and ‘90s, insurers saw loss ratios of 70% to 80%. In other words, for every $1 spent on property insurance premiums, 70% to 80% of that was going toward claim payouts.
Today, those ratios have dropped to under 62%.
“These are very low ratios,” the study reads. “It means that while the P&C insurance industry collected $1.03 trillion in premiums in 2024, after paying claims, it had $383 billion left over.”
While climate change has led to more natural disasters — and insurance claims due to them — the study found that insurance losses only increased 40% due to climate change between 2020 and 2024. Premiums during that period, though? Those soared 61.5%.
Even in the most disaster-prone states, property insurance companies are still raking in the profits. In California, where wildfires have ravaged countless communities in the last decade, loss ratios are just 47%.
Where your property insurance premiums are going
The proceeds from alleged insurer price-gouging are mostly going toward advertising costs, excessive shareholder returns, and lining executive pockets, the study concludes.
“A lot of the excess is going to profit,” the study says. “By some estimates, both return on assets and return on revenue were above 15% in 2024, which is up from 8 to 9% in 2023. Both are higher than the average corporate profit margin.”
Insurers apparently spent a whopping $135 billion on advertising, agent commissions, and customer acquisition costs in 2023, the study explained, and executive compensation topped out at an eye-watering $250 million just for the industry’s top 10 insurers.
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Insurance companies are spending “frivolously” on corporate jets, the study added, with State Farm buying four private jets between 2023 and 2024 alone.
Insurers also spent nearly $15 billion on stock buybacks and dividends last year, and though collectively, they’re putting a smaller share of premiums toward claim payouts, they’re also spending more on fighting customers over those same claims. A whopping $90 billion went toward fighting claims in 2024.
Vanderbilt University explains how to fix insurance price-gouging problem
Vanderbilt’s study presents a few recommendations for fighting back against insurer price-gouging. Instituting a minimum 80% loss-ratio floor is one of them. The study says this alone would save policyholders $150 billion per year.
Exit restrictions, which would keep insurers from threatening to leave a region if their rate increases aren’t approved, could also help. And converting state-run plans into open-market plans may improve price competition.
State commissioners can be more aggressive in denying rate increases for insurers with low loss ratios or even ban insurers from spending premium proceeds on private jets, stock buybacks, and excessive advertising, the report suggested.
“States and the federal government can require more public disclosure of non-claims costs like executive compensation, money spent on advertising and agent commissions, dividends to parent companies, entertainment budgets, and private jets,” Shearer said. “States are already doing this for energy utilities.”
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