April CPI: Auto Insurance vs. Claims Cost Spread - Incremental Positive

Research evidence excerpt

April CPI: Auto Insurance vs. Claims Cost Spread - Incremental Positive

I N D U S T R Y N O T E

M a y 1 2 , 2 0 2 6

Insurance

CONCLUSION Paul Newsome, CFA, CPCU

April's inflation news is incrementally positive for insurers despite decelerating prices and Managing Director, Piper Sandler & Co.

rising claim costs, as it appears April's claim cost inflation rose more slowly than personal 312 281-3445, paul.newsome@psc.com

lines pricing: auto insurance prices decelerated, home insurance prices decelerated and Cam Bianchi

claims costs accelerated. The spread between auto insurance claims cost inflation turned Research Analyst, Piper Sandler & Co.

612 456-9841, cam.bianchi@psc.compositive after being negative for the last 3 months. The CPI results are an incremental

positive for insurance brokers, where organic growth is positively impacted by acceleration INDUSTRY RISKS

of price inflation. Overall, CPI is an incremental indicator and is good for getting a sense of

The P/C insurance industry is subject to riskincremental trends, but we would caution investors about trading based solely on CPI data.

including catastrophe events, changes in interest

rates and fixed income credit losses, declines

• Conclusion: incrementally, the CPI news was favorable for insurance brokers, in equity valuations in their investment portfolios

slightly positive for auto insurers and slightly worse than prior months for home and higher claim costs related to inflation and

insurers. changes in the legal and regulatory environment.

• Accelerating inflation is a positive for the insurance brokers. Insurance broker

revenues are typically a function of nominal price levels and economic activity.

• The spread between auto insurance prices and claims costs was positive this

month.