Should home insurance companies be making this much money?

Summary

Marketplace Morning Report – Podcast Summary

Episode: Should home insurance companies be making this much money?
Date: May 19, 2026
Host: Nancy Marshall Genzer

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Episode Overview

This fast-paced episode dives into the surging costs of home property insurance in the US, questioning industry profit levels and spending practices. Nancy Marshall Genzer speaks with economist Lauren Seidel Baker about consumer spending trends and then interviews Brian Shearer, Director of Competition and Regulatory Policy at the Vanderbilt Policy Accelerator, about the property casualty insurance industry’s profitability and practices. The episode aims to illuminate whether the rising premiums are driven by climate and disaster risks, or by profit motives and questionable expenditures within the insurance business.

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Key Discussion Points & Insights

1. U.S. Consumer Spending and Retail Trends

[01:01–03:40]

• Retail sales data trends: April retail sales rose by 0.5%, the third monthly gain, though a large portion was due to increased spending on gas rather than other goods.
• Energy costs in household budgets: Americans spend roughly 3.7% of their budgets on energy—a near-record low.
  • Lauren Seidel Baker [01:51]:

    "Over the long term, we're actually spending less and less, not just on gas, but on heating oil and electricity and all of those other energy categories."

• Housing market impact: Home Depot’s stable demand is more reflective of housing market uncertainties (tied to high interest rates) than general consumer spending.
• Looking ahead: Reports from Walmart, Target, and TJ Maxx will reveal more about the true state of consumer finances.
  • Lauren Seidel Baker [03:04]:

    "It seems like the consumer is still out earning inflation, that is changes to our earnings or to our wages are increasing at a (faster) case than inflation is taking a bite out of those earnings."

2. Property Insurance Costs & Industry Profits

[05:30–09:01]

• Rising property insurance premiums: Annual industry premiums are nearing $1 trillion, with meteoric increases not fully explained by climate disasters.
• Industry profits & trends:
  • Since the 1990s, the gap between premiums collected and claims paid has grown, leading to over $100 billion extra charged to Americans each year.
  • Profit margins doubled in 2024 and 2025, surpassing $150 billion each year.
    • Brian Shearer [06:06]:

      "We're seeing huge spikes in profits... since the 90s... Americans and American businesses have been paying over $100 billion extra every year."

• Industry spending choices: Instead of saving for emergencies, much of the margin is spent on stock buybacks, dividends, advertising, and luxury items (such as private jets).
  • Brian Shearer [06:40]:

    "In 2025, Progressive spent 20% of its revenue on stock buybacks and dividends. In 2024, State Farm bought four private jets. Not one, but four."

• Response from industry representatives: The American Property Casualty Insurance Association claims only a 6% profit over the past decade, which is less than the Fortune 500 average (14.9%). Shearer rebuts that insurers are not meant to make significant profit on the insurance product itself—they act more like investment firms.
  • Brian Shearer [07:34]:

    "They're really not supposed to make a profit on the insurance product itself. They make their money from generating returns on the surplus fund in the stock market... the source of their capital is paying them."

3. Critique of Industry Practices

[08:18–08:55]

• Shortcomings in “rainy day” saving rationale: Not all profits are set aside for insurer reserves—much is diverted to marketing and rewarding shareholders.
• Accountability gap: Shearer argues consumers should be skeptical of industry arguments that they must charge and save more due to disaster risk, when much of the surplus isn’t set aside for claims.

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Notable Quotes & Memorable Moments

• On profit margins and waste

  "It's not just a story about higher profits, it's also a story about wasteful spending."
  — Brian Shearer [06:40]

• On insurance profit motive

  "They're really not supposed to make a profit on the insurance product itself."
  — Brian Shearer [07:34]

• On use of policyholder funds

  "A great deal of the margin isn't going into the surplus fund. It's going to $150 billion to ad budgets and agent commissions."
  — Brian Shearer [08:18]

• On big-ticket company spending

  "In 2024, State Farm bought four private jets. Not one, but four."
  — Brian Shearer [08:18]

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Important Timestamps

• 01:01 – Introduction to consumer spending trends; retail sales and energy costs.
• 02:20 – Home Depot earnings and the housing market context.
• 03:04 – Upcoming earnings; consumer resilience to inflation.
• 05:30 – Introduction to the property insurance conversation.
• 06:06 – Industry profits and how much Americans are overpaying.
• 06:40 – Discussion of specific profits, expenditures, and ad budgets.
• 07:34 – Industry rebuttal and Shearer's response; insurance as investment.
• 08:18 – Critique on insurer 'rainy day fund' argument; examples of spending.

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Tone & Takeaways

The episode maintains the Marketplace trademark of clear, direct, and lightly skeptical economic journalism. Both Lauren Seidel Baker and Brian Shearer offer accessible, data-driven insights with a focus on demystifying industry claims versus reality. The tone persistently challenges the status quo, especially concerning insurance industry practices.

For listeners:
If you've felt squeezed by rising home insurance bills, this episode provides critical context and suggests that high premiums may be more about corporate profit and spending than unprecedented disaster risk. The debate over what insurance is and what it should be—protective shield or profit engine—is at the episode's heart.

Transcript

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[Nancy Marshall Genzer]

are uncertain consumers still spending From Marketplace, I'm Nancy Marshall Genser in Washington. We're getting an update on retail sales this week from some big names including Home Depot and Walmart. Last week we got retail sales data from the Census Bureau that showed Americans kept spending Last month, retail sales rose by a half percent in April, the third straight monthly gain. For more on what this week's round of earnings might tell us, we're joined by Lauren Seidel Baker, economist at the New Hampshire based economics consultancy firm ITR Economics. Good morning, Lauren.

[Lauren Seidel Baker]

Good morning.

[Nancy Marshall Genzer]

So April's retail sales numbers came with a catch. A big chunk of that growth was coming from how much we're spending at the gas pump, not what we're putting in a shopping cart. So how do you sort through that?

[Lauren Seidel Baker]

That's going to be a challenge in the coming months. However, one of the metrics that I've personally been looking at is just much we as Americans spend on energy. Today, that's about 3.7% of our total budgets, which is very close to the record low that we saw during COVID of 3.5%. So over the long term, we're actually spending less and less, not just on gas, but on heating oil and electricity and all of those other energy categories.

[Nancy Marshall Genzer]

Home Depot reported first quarter earnings this morning. They said demand is about the same as last year, despite more consumer uncertainty. So how are their earnings tied to to interest rates?

[Lauren Seidel Baker]

This is actually pretty good news. What we saw from the Home Depot earnings, they will be more affected by the housing market. Anytime we think about those big ticket purchases, things like cars, houses, the consumer sentiment does flow through a little bit more strongly rather than retail sales where we might be feeling bad but we're still going out and spending generally as we had been.

[Nancy Marshall Genzer]

We're going to be hearing from some more retailers this week, Walmart, Target and TJ Maxx. Are we gonna get more good news there?

[Lauren Seidel Baker]

Those will probably be a truer view of the US consumer rather than this additional housing component which as you mentioned have still elevated interest rates and some affordability constraints. So I'll be watching those very closely. At this point it seems like the consumer is still out earning inflation, that is changes to our earnings or to our wages are increasing at a f case than inflation is taking a bite out of those earnings.

[Nancy Marshall Genzer]

Lauren Seidel Baker, economist at the New Hampshire based economics consultancy firm ITR Economics thank you Lauren.

[Lauren Seidel Baker]

Thanks so much.

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[Nancy Marshall Genzer]

this is no surprise to you. Property insurance is expensive and it seems to get more and more pricey every year. Some might blame climate change or natural disasters, but if you look under the hood of the $1 trillion in premium payments last year, the numbers might tell a different story. Here to talk about what's causing this cost explos is The Director of Competition and Regulatory Policy at the Vanderbilt Policy Accelerator, Brian Shearer, who's written extensively on the topic. Good morning.

[Brian Shearer]

Good morning.

[Nancy Marshall Genzer]

So how profitable is the property casualty insurance industry?

[Brian Shearer]

Well, it's very profitable. We're seeing huge spikes in profits. But in addition to that, we're seeing a kind of longer term trend starting in the 90s when the margin between what insurance companies are paying out in claims and what they're collecting in premiums started increasing. And because of that, Americans and American businesses have been paying over $100 billion extra every year.

[Nancy Marshall Genzer]

Can you quantify that?

[Brian Shearer]

Yeah. So in 2024 and 2025, the profit margins of the industry doubled and they were 150 billion. Both years, over 150 billion. And that's on top of all of the excess spending. Of course, they also are spending money on things like private jets. Stock buybacks have been increasing. Dividends to investors have been increasing. The ad budgets have always been large and continue to be. So it's not just a story about higher profits, it's also a story about wasteful spending.

[Nancy Marshall Genzer]

Now, we did reach out to the trade group representing these insurers, the American Property Casualty Insurance association, and they say they've made a profit of 6% over the past decade. And they say that's lower than the 14.9% average for most Fortune 500 companies. They say they're not price gouging. What's your response to that?

[Brian Shearer]

They're really not supposed to make a profit on the insurance product itself. They make their money from generating returns on the surplus fund in the stock market. So in some ways, it's better to think of insurance as an investment firm and the insurance product as how they get their investment capital. So, you know, a return on the insurance business, you know, might seem low, but that means their cost to acquire investment capital is actually negative. The source of their capital is paying them.

[Nancy Marshall Genzer]

From the association's point of view, they say insurers have to make money so they have something to store away for a rainy day for years when there are big losses. Are they? Right?

[Brian Shearer]

There's a real question about whether they're actually saving the excess money. A great deal of the margin isn't going into the surplus fund. It's going to $150 billion to ad budgets and agent commissions. In 2025, Progressive spent 20% of its revenue on stock buybacks and dividends. In 2024, State Farm bought four private jets. Not one, but four. And so, you know, I think we should be more sympathetic to that. Explanation if the insurance industry was actually saving the money.

[Nancy Marshall Genzer]

Well, Brian Shearer, director of Competition and Regulatory policy at the Vanderbilt Policy Accelerator. Thank you.

[Brian Shearer]

Thank you.

[Nancy Marshall Genzer]

In Washington, I'm Nancy Marshall Genzer with the Marketplace Morning Report from apm, American Public Media.

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