Auto Claims Profitability Improves Amid Rising Casualty Costs and Trade Issues

In Q2 2025, the U.S. auto claims and collision repair industry has shown promising signs of profitability after a challenging period. The industry’s net combined operating ratio improved significantly to 96.6% in 2024, reflecting substantial gains especially in personal auto insurance. Contributing to this positive momentum were consecutive years of premium growth and improved loss ratios in auto physical damage (APD).

However, the commercial auto insurance sector continues to struggle, with a combined ratio exceeding 100%, indicating ongoing unprofitability. These issues stem partly from less aggressive rate adjustments and consistent increases in premium rates, combined with sustained pressure from elevated loss costs.

Casualty insurance sectors remain strained by escalating severity and rising frequencies in bodily injury claims. Notably, medical bill inflation in auto claims has surpassed general healthcare inflation, fueled by increased utilization of advanced medical procedures and alternative treatments, alongside persistent social inflation driving larger and more frequent verdicts.

Looking ahead, insurers will need to focus strategically on maintaining repair network performance, controlling costs, enhancing digital claim management capabilities, and navigating complex economic conditions marked by tariff impacts and supply chain challenges. These actions are essential to sustaining the recent gains and effectively managing persistent pressures.