Performance-based pay packages incentivize claim denials and other harmful practices.
This article was originally published by The American Prospect.
Climate disasters are causing “record-high insurance losses,” a recent CNN article began, citing insurance industry research. The first half of 2025 brought about “a new market reality,” it said, with climate-related losses for insurers setting a record for the January to June period.
It is true that insurance companies have made some large payouts for recent climate disasters, and are choosing to pull out of certain markets entirely. However, it is not true that the industry as a whole is suffering. On the contrary, it is rolling in profits.
Credulous reporting like CNN’s reflects a playbook lately adopted by insurance companies: Play the victim, exaggerate losses and threats—and carefully avoid any discussion of the bottom line, or how much executives and investors are making.
Indeed, despite home insurers’ public griping, the industry is more profitable than ever. Executive compensation is increasing thanks in large part to so-called performance-linked pay packages that incentivize claim denials and other anti-consumer practices. As we detail below, a review of the uneven industry data available from public filings reveals just how well insurance executives are doing at the expense of their customers.
The U.S. property and casualty (or P&C) insurance industry, which includes home and auto, had a banner year in 2024. Profits hit an all-time high of nearly $167 billion, up 91% from 2023 and 330% from 2022. The bulk of the industry’s profits come from investment income, though P&C insurers also cleared more than $25 billion in underwriting profit last year. And that’s a conservative estimate, based on a method of calculating underwriting gains, called a “combined ratio,” that artificially weighs down the metric by adding extra baggage to the “claims paid out” side of the equation. The industry adds in overhead expenses, including office space, advertising, and commissions, with underwriting losses. But if you look strictly at the ratio of claims paid out relative to premiums collected, insurers are coming out on top in the vast majority of the country’s ZIP codes.
Those record profits come at the expense of aspiring homeowners, who are facing unjustified premium hikes, claim denials, and coverage withdrawals. While most borrowers finance their homes for 30 years, insurers reprice risk annually. This temporal imbalance is a major problem. Home insurance is becoming so expensive that a growing number of households, especially first-time home buyers, are struggling to make their monthly mortgage payments. The dwindling availability and affordability of insurance also hurts renters by making it harder for developers to build.
Anyone listening to the property and casualty industry could be forgiven for believing insurers are struggling. The industry’s claims of massive “losses,” however, are not reflected in financial reality. Shareholders and executives continue to make a killing year in and year out. Take, for instance, Florida-based Slide Insurance CEO Bruce Lucas and his wife, Slide’s chief operating officer. Last year they brought home direct compensation worth $21 million and $16.5 million, respectively, as Florida homeowners endured surging premiums. Add in bonuses and stock awards, and their full pay package was $50 million.
Troublingly, at most big insurance companies, executives can collect such lavish pay packages without much scrutiny or oversight. Most of the top writers of homeowners insurance are structured as mutual companies, like State Farm and Liberty Mutual, or exchanges, like Farmers, that do not sell shares to the public—and therefore need not file public reports on executive compensation with the Securities and Exchange Commission.
This is an indictment of the existing regulatory structure. A 1945 law called the McCarren-Ferguson Act immunizes most insurance companies from federal regulation. State insurance regulators could theoretically step into the gap, but they are largely captured and allow the industry to operate in the shadows with little transparency. That may explain why few states even ask their domestic insurance companies to disclose executive pay.
But we’re not completely in the dark. For companies with publicly traded U.S. stocks, the SEC compels extensive annual compensation disclosures. Nine of the top 25 writers of U.S. homeowners policies in 2024, comprising 24% of the Homeowners Multiple Peril market, the most common type of homeowners insurance, fall into this category. Reports they filed with the SEC this year detail compensation to their highest-paid executives. These data show that despite the P&C industry’s pessimistic narrative, its fortunes are rising, lifting executives’ boats.
At these nine companies, 42 top executives collectively took home $310.1 million—about $7.3 million each, on average, according to a new Public Citizen-Revolving Door Project analysis of proxies filed this year. Pay increased at all nine companies in 2024 from 2023 by an average of 30%, mirroring recent premium hikes. (The pay increases ranged from 4.5% at Travelers to 114% at Mercury General.)
At Allstate, the biggest homeowners writer in the group with 9% national market share, pay to four executives leapt 75%—and CEO Thomas Wilson took home 2024 compensation worth $26.1 million, up from $16.5 million in 2023. That included perks like $70,000 for use of a company jet. (A fifth Allstate executive was excluded from the analysis because her 2023 compensation was not disclosed.) Other highly-paid standouts include Chubb CEO Evan Greenberg, whose compensation rose 9% to $30.1 million, and Travelers CEO Alan Schnitzer, whose compensation edged up 1.4% to $23.1 million.
The lavish pay packages do not correlate to companies’ sizes: Average pay per billion dollars of market capitalization ranged from about $47,000 at Progressive to $3.5 million at Universal Insurance Holdings.
What they do have in common is their linkage to “performance metrics” that tend to benefit shareholders at the expense of consumers. At big companies like Allstate, Chubb, and The Hartford, 92% to 95% of CEO compensation is considered “at risk,” meaning it is linked to things like the so-called combined ratio—that misleading underwriting metric, mentioned earlier, that lumps in overhead costs while also comparing premiums collected to claims paid out. That creates a bad incentive. To goose the combined ratio, an executive can simply instruct claims handlers to deny or delay a higher percentage of homeowners’ legitimate claims.
Likewise, to boost another key metric—Return on Equity (ROE)—a company could spend heavily on share buybacks, rewarding shareholders by cutting the number of shares outstanding, while reducing funds available to pay claims or provide coverage in more vulnerable areas. Refusing to renew policies for higher-risk policyholders boosts the combined ratio and ROE. Increasing deductibles and premiums likewise can help increase ROE, leading to steep executive pay increases like that seen at Allstate.
In short, pay packages at top insurance companies incentivize corporate leaders to improperly deny claims, withdraw from areas that are more disaster-prone but where they could still afford to provide coverage, and implement other measures that ultimately harm their customers.
In the absence of data, we can only guess at whether the same conditions hold at large mutual insurers like State Farm.
Notably, there are other metrics companies could use that would align executives with consumers. For instance, firms could boost remuneration for executives who minimize claims processing time, reduce the percentage of claims that end up in litigation, or meet climate-related targets. Instead, the industry is actively choosing to reward anti-consumer actions.
Much attention is being paid, justifiably, to the health insurance industry’s plan to hike premiums amid record profits. At a time when more and more households are vulnerable to climate-driven disasters, we shouldn’t lose sight of the fact that the home insurance industry is following the same playbook.
Most damning of all, the industry continues to invest in and underwrite coal, oil, and gas even though fossil fuel pollution is exacerbating the extreme weather that insurers point to when justifying policy cancellations and rate hikes. U.S.-based insurance firms are estimated to hold between $536 billion and $582 billion in fossil fuel-related assets, and they also make billions every year from underwriting dirty energy projects.
Once again, there is an opportunity here to align executives’ and consumers’ interests. Premiums from fossil fuel underwriting constitute a small portion of the P&C industry’s total premiums. As climate-related damages mount, the industry must reconsider its willingness to jeopardize the planet’s livability for a relatively insignificant sum of money. But if recent history is any guide, for any of that to happen, regulators or legislators will have to force them to do it.
The above photo of Allstate CEO Thomas Wilson comes from the company’s 2016 annual report.