PROFITABILITY RETURNED, BUT INSURERS ENTERED 2026 WARY OF THE STRUCTURAL RISKS THAT NEARLY BROKE THE MARKET TWO YEARS EARLIER
Auto insurers entered 2026 ready to grow again, but Patrick Sullivan said the industry was moving carefully. Profitability had returned. Confidence had not.
“The last couple of years were interesting to say the least,” Sullivan told attendees during the February CIECA webinar Navigating the Sea of Insurance Trends in 2026. “Carriers went through the full gamut of emotions since 2020.”
After historic underwriting losses in 2022, insurers raised rates sharply to stabilize their books. By late 2024, most had returned to profitability and remained there through 2025. That recovery reopened the door to growth, but it did not erase the underlying structural risks.
“[Auto insurers] were hungry for growth in 2026, but at the same time there were underlying trends that really worried them,” Sullivan said. “[Profitability] came back, but the risks that caused the losses never really went away.”
The most significant of those risks was repair severity. The average cost to repair a vehicle nearly doubled over the past decade, rising to $4,768 by the third quarter of 2025 from roughly $2,500 in 2008.
“THAT WAS A FUNDAMENTAL CHANGE IN WHAT IT TOOK TO REPAIR A CAR. [REPAIR SEVERITY] DID NOT SPIKE AND THEN COME BACK DOWN. IT MOVED UP, AND IT STAYED THERE.”
“That was a fundamental change in what it took to repair a car,” Sullivan said. “[Repair severity] did not spike and then come back down. It moved up, and it stayed there.”
ADAS often receives the blame for rising costs, but Sullivan said the data tells a more limited story. Vehicles fully equipped with ADAS now represent roughly one-third of the U.S. fleet and reduce claim frequency by about 33%, largely by preventing minor crashes. “That wasn’t really what was driving the problem,” he said. “[ADAS] was cutting low-severity claims, not offsetting high repair costs.”
Instead, Sullivan pointed to how vehicles are designed. Safety performance and feature content dominate engineering priorities. Repairability does not.
“Vision Zero really defined how OEMs approached vehicle design,” he said. “[OEMs] focused almost entirely on saving lives, very successfully, but that left blind spots around severity.”
He described watching a driver tear a side mirror off her vehicle in a dark parking garage — a small mistake that became an expensive repair.
“No amount of technology was going to fix that,” Sullivan said. “[Once you add cameras, sensors and motors], a simple mistake turns into thousands of dollars.”
When traffic volumes returned after the pandemic, risky driving habits returned with them.
“When people came back on the road, they didn’t change how they drove,” Sullivan said. “[Drivers] kept driving faster. They stayed distracted. They crashed harder than anyone expected.”
The result was 2022.
“We were unable to find a year worse than 2022,” he said. “[In the industry data], you probably had to go back to the first time someone mispriced a Model T to see something comparable.”
Insurers responded by raising rates aggressively. Large carriers increased premiums by an average of 16.9% in 2023. Increases slowed in 2025 once profitability stabilized.
“They had to raise rates to keep paying claims,” Sullivan said. “[Without those increases], the math didn’t work.”
Total losses added further pressure. Roughly 22.8% of claims ended as total losses, the highest level on record, even with used vehicle values still elevated.
“It took far less damage to total a car than it used to,” he said. “[Vehicle complexity] pushed cars over the line faster.”
Vehicle mix compounded the problem as consumers continued shifting into heavier SUVs and pickup trucks.
“At the same speed, those crashes were simply more severe,” Sullivan said.
Economic pressure also distorted frequency data. Higher deductibles and tighter household budgets led some drivers to absorb losses instead of filing claims.
“I don’t think people were actually having fewer accidents,” Sullivan said. “[Many drivers] just didn’t want to file a claim.” Even advanced safety systems offered no protection against weather-driven losses.
“You can’t ADAS your way out of a hailstorm,” Sullivan said. “[Some losses] have nothing to do with driver behaviour or safety systems.”
By early 2026, insurers were profitable again. Growth returned to the agenda. Caution remained.
“They might have been fat and happy,” Sullivan said, “but [auto insurers] were still worried.”
