Americans are paying more for insurance, and a new analysis released with Associated Press details argues much of that increase comes from insurers collecting more in premiums than they pay out in claims. The study says the gap could be large enough—about $150 billion annually—that consumers and businesses could reduce costs if federal regulators set guardrails for insurers’ loss ratios.
The Vanderbilt Policy Accelerator analysis examined how insurers have performed after accidents, natural disasters and other misfortunes, focusing on the difference between premiums and claims payouts. It says that in 2024 insurers reimbursed 62 cents for each $1 collected in premiums, compared with an average loss ratio of 80 cents in the 1980s and 1990s.
Brian Shearer, director of competition and regulatory policy at Vanderbilt and a former senior adviser at the Consumer Financial Protection Bureau, argued that the lower payout rate indicates insurers are charging too much. The analysis, according to its description by the study team, also links the trend to the economics of insurance regulation and the political debate over how to balance affordability pressures with the risk of losses.
Insurers and their industry group disputed the conclusion. Don Griffin, vice president for policy and research at the American Property Casualty Insurance Association, said in an emailed statement that current loss ratios reflect “enormous financial losses over the last several years” and “the steps insurers have taken (to) maintain and restore financial strength so funds are available to pay future claims.” He also pointed to the impact of Hurricane Andrew in the 1990s, saying those earlier loss ratios were driven to nearly unsustainable levels.
Griffin argued that mandating loss ratios would harm consumers, saying “we have seen what happens when government limits insurers’ ability to appropriately price policies: markets deteriorate and policyholders are left with fewer options for coverage at higher prices.” He said the state-based regulatory system is “best suited” for overseeing the insurance industry and contrasted it with what he described as federal guidelines proposed in the Vanderbilt analysis.
The report’s recommendations would move the issue from state regulation to a federal framework. It includes proposed legislative language that would require the federal government to set a higher loss ratio for insurers, an approach the analysis said would be more difficult for companies to challenge than the current system where states primarily oversee insurance.
The analysis also argues that insurers have used premiums not just to pay claims but to cover other expenses, including marketing and corporate financial priorities. In the Associated Press description of the study, the analysis cites insurers using premium revenue “to pay for corporate perks, corporate jets, stock-buy backs, excessive executive compensation, excessive dividends, excessive advertising, and excessive agent commissions,” while presenting competition as driven more by brand awareness than price.
The debate arrives as voters and policymakers weigh housing affordability and broader inflation pressures. The AP account said President Donald Trump won a second term on a promise to contain inflation and that he has also dismantled or weakened institutions such as the CFPB that sought to find savings. The account also pointed to housing costs, saying average mortgage rates remain above 6% and that a March executive order to increase construction would still take years to reduce housing prices.
When Trump signed the order on housing regulations in March, he emphasized that he was removing standards designed to protect homes against natural-disaster damage and to improve energy efficiency, saying those measures were increasing construction costs. The executive order, in the AP account, is part of an effort to slash what Trump described as “pointless regulations” that add costs.
The Vanderbilt analysis stands in contrast to research by economists Benjamin Keys and Philip Mulder, which the AP account said found average home insurance premiums rose 28% between 2017 and 2024 after adjusting for inflation. That research, as described, attributed about a third of the increase to higher construction costs and another 20% to greater disaster risks, while also noting higher costs for financial instruments such as reinsurance.
Vanderbilt’s approach, as the AP account summarized, estimates savings by returning to what it calls more consumer-friendly loss-ratio levels. By comparing current claim payouts with the 80-cent loss ratio from the 1980s and 1990s, it estimates households and businesses could have saved roughly $150 billion from more than $1 trillion paid in premiums in 2024.