With its 2024 combined ratio falling comfortably more than 7 points below a targeted level of 96, Progressive has room to deal with the impacts of tariffs on car repair and replacement costs, the chief executive said.
But that doesn’t mean the company is not working to understand potential tariff effects, Progressive CEO Tricia Griffith said March 4 during a call to discuss fourth-quarter and full-year results.
Griffith described the in-depth work Progressive’s pricing and economics teams are doing—working together to deliver insights to leaders and prepare to flex personal lines pricing models as tariffs take effect. At one point, she also spoke about longer term potential frequency dips and tailwinds to the commercial auto insurance line.
Speaking just before Canadian Prime Minister Justin Trudeau responded to the imposition of U.S. tariffs on Canadian imports by U.S. President Donald Trump with immediate and still-to-come retaliatory taxes on U.S. goods, and after Mexican President Claudia Sheinbaum vowed to announce retaliatory taxes in the coming days, Griffith contemplated a narrower insurance industry-focused question about how tariff-induced loss cost jumps in the second-half of this year might impede top-line growth initiatives of personal auto insurers.
“Typically tariffs are a one-sided risk to our loss costs,” Griffith said, responding to what she described as a timely and relevant question that’s garnered the attention of Progressive’s pricing and economic teams. “I’m not going to share with you the raw data or the assumptions we use, but… we actually have what we think, at this time, percentages would be if certain tariffs happen now,” she said, referring to loss cost percentage jumps.
“Those will ultimately change and we’ll be able to flex our models,” she said. “It will depend on the countries, the products, the magnitude of severity, but ultimately we will price those into our indications.”
She went on to suggest that there are a lot of “puts and takes” to consider as the tariff war situation unfolds. “With the tariffs that went to effect today, we’ll have to think about new car prices. Do those prices get passed on from the [original equipment manufacturers] to our customers? What does that mean to values?”
“Obviously from both Mexico and Canada, we get a lot of our parts to repair cars. When will those play out?” Griffith asked. She agreed with an analyst that impacts on loss costs would likely come in the second-half of 2025 and into 2026.
On the other hand, she noted that tariffs on oil, at some point, could increase gas prices. “Does that make people drive less? Does that change frequency?”
“Is there a talent shortage in the body shop industry, [like one] that happened a couple of years ago,” she asked referring to the impact of the immigration policies of the Trump administration.
“It looks like there might be some additional tariffs on lumber from Canada at a minimum,” she continued. “What does that do to home prices, and of course home repair prices?”
Impacts to the costs of fixing homes and fixing cars are factored into Progressive’s models, she said. “We’re modeling all of that together, and a lot of it will depend on how much inventory is out there.”
Offering a more future-looking view of second- and third-order effects, Griffith said that any initiatives to source more lumber for rebuilding from inside the U.S., creates a need to build more sawmills. “That can’t happen overnight. What does that do to trucking and loggers?” she asked, suggesting that there could be a “tailwind” impacting the commercial lines insurance organization inside of Progressive.
Bottom line, she said, all the macroeconomic data is being digested and planned inside the walls of Progressive. “We have a bunch of models. We are able to flex those models every time we get a new piece of data or the data changes.” Progressive’s general counsel and team are absorbing Trump’s executive orders to assess how they affect the insurer.
“When there’s disruption in pricing, we are really good [at reacting] really quickly. And you’ve seen that,” she said, referring to Progressive’s moves to raise auto insurance prices in response to inflation in recent years.
“The last thing I’ll say on this is that we are sitting in a good position because right now our margins are below our 96,” she said, referring to a long-held goal of the company to achieve a 96 combined ratio. “We are sitting on some margins. So, we can play this out as things evolve,” she concluded. The 88.8 combined ratio and 21% growth in net written premiums to $74.4 billion made 2024 the greatest year in the 87-year history of the company.
More Executive Views: We’re Ready
During a separate event, the 46th Annual Raymond James Institutional Investor Conference, executives from two other personal lines insurers—Allstate and Kemper—also discussed their improving results for 2024 and gave their views on the impacts of tariffs. In short, Jess Merten, chief financial officer of Allstate, and Joseph P. Lacher, Jr., president and CEO of Kemper, said their companies are ready for whatever loss cost changes the tariffs bring.
Read the rest of the story in Carrier Management, Insurance Journal’s sister publication.
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Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.