Wall Street Journal Overlooks Key Distinction In Article on Underwriting Gains

Insurance industry profits are not the same thing as profits for homeowner insurance companies. That is the basic misunderstanding of The Wall Street Journal's article published January 22, 2026, titled "The Uproar over Affordability is Coming for Insurers."

Much of the overall industry's gains are coming from improvements in underwriting returns on personal auto lines and commercial insurance. That's why we've seen auto insurance rates stabilize, with actual rate reductions in many states.

But homeowners insurance underwriting was barely profitable in 2024, and has posted underwriting losses for most of the last several years. The only way much of the homeowners insurance sector has managed to stay in business is through responsibly investing premiums to offset these underwriting losses.

And even after these investment gains, the average return on net worth (RONW) for homeowners insurance lags well behind Fortune All Industry companies. The national RONW from 2014 to 2023 for homeowners insurance was 4%, compared to 14.9% for Fortune All Industry companies.

In Florida during that same period, the RONW for homeowners was just 1.5%. In California, it was not possible to make profits in the homeowners insurance space for a decade, even after accounting for investment returns. The RONW was -0.1%.

But market conditions are now stabilizing. Costs driven higher by post-pandemic inflation, elevated catastrophe losses, supply chain pressures and capital constraints are moderating.

Recent years required significant balance-sheet rebuilding after persistent underwriting losses - particularly in the homeowners line - that contributed to financial rating downgrades and in some cases insolvencies.

These gains are not windfalls. They are the rebuilding of essential financial strength. Companies must maintain robust surplus levels to absorb catastrophic shocks, ensure claims paying capacity, and keep markets functioning during extreme events.

There are ways to ease inflationary pressures on insurance premiums. We've seen auto rates coming down in particular in states where governors are cracking down on fraud like staged accidents and lawyers taking advantage of broad liability statutes to try to soak businesses for all their worth.

Florida cracked down on insurance fraud and legal system abuse in 2022 and 2023. Now, insurance rates are dropping and more companies are entering the market to offer coverage. We are seeing similar patterns play out in Georgia and Louisiana, which both implemented reforms in 2024.

In New York, Gov. Hochul is also taking on the scourge of staged accidents, which if successful will likely help ease upward pressure on insurance rates. At the same time, another proposal to cap insurance premiums artificially would follow a path similar to California's approach.