Credit ratings agency AM Best reports that average annual rate increases for U.S. private passenger auto and homeowners insurance in 2025 are close to pre-pandemic levels.
The company noted that both pay lines had experienced substantial growth in recent years, driven by rising claims costs and increased loss activity.
Data from AM Best shows that the average approval increase for homeowners insurance in 2025 is down 5.2 percentage points year-on-year to 8.3%, while the average approval increase for private passenger auto insurance is 3.7%, down from 9.7% in 2024.
“The improvement experienced by U.S. homeowners insurers was driven by aggressive rate increases and increased pricing complexity in states that produced the most adverse outcomes,” said David Blades, associate director at AM Best. “Power purchase agreement and homeowner underwriting performance progressed in part due to a combination of driving premium adequacy,” he added.
AM Best ties these changes to the progress of insurer filings and broader pricing adjustments tracked through Best’s state rate filing data set. According to AM Best’s analysis, pressure to increase premiums in 2023 and 2024 is largely related to the increase in the frequency and severity of claims in the U.S. personal insurance market.
The company observed a significant slowdown in the scale of rate hikes in 2025, consistent with improvements in underwriting performance in the previous period. AM Best also highlighted stronger overall performance among homeowners insurance companies, with the industry loss ratio improving 9.2 percentage points from 74.8 in 2023 to 65.6 in 2025.
For private passenger auto insurance, AM Best reports broadly similar patterns, although results are not uniform across states. The company noted that insurers in the sector returned to underwriting profits in 2024 for the first time since 2020, when performance was impacted by the pandemic.
AM Best noted that despite a slowdown in rate increases nationwide, states such as California, Nevada, New Jersey and New York will still have relatively high auto insurance pricing in 2025. The company also noted that over the past three years, jurisdictions with smaller changes in average rate increases between 2024 and 2025 tend to have combined loss ratios above the national average.
“As insurers in these states achieve more favorable underwriting results in 2025, rate filings in the near future are likely to reflect these positive results,” AM Best associate analyst Dylan Catania said.
AM Best further explained that the impact of approved rate changes depends on the regulatory approval process and how quickly insurers implement adjustments after approval, which varies between jurisdictions.
The company added that recent patterns show a link between lower loss rates and smaller subsequent rate filing sizes, which it believes could be an indicator of more stable underwriting conditions going forward.
