As insurance premiums have risen rapidly, beating inflation rates, companies such as home and auto insurer Progressive (NYSE: PGR) have reaped the rewards.
Progressive remains the second-largest insurance company in the U.S. and has generated growth for several decades by insuring the homes, cars, and trucks of consumers.
Car and home insurance rates continue to rise, outpacing the cost of living. Inflation rose by 3% between 2023 and 2024, but the cost of premiums jumped up by over 13%, according to the National Association of Insurance Commissioners’ 2025 report.
Insurance giants such as Progressive continue to dominate the market. Progressive and State Farm account for over 35% of the auto insurance market alone.
Since consumers pay premiums each month to insure their homes and cars, insurance companies generate steady revenue that is not impacted by inflation rates or tariffs.
Shares of Progressive have slumped during the past six months and fallen 19.5%, but the stock’s losses are starting to slow down. Investors lost some interest when Progressive’s earnings during the third quarter fell slightly below what analysts had expected.
Progressive reported revenue at $21.38 billion in the third quarter, which is a 10% increase from the same quarter in 2024, but fell below the $21.8 billion estimated by analysts.
While growth has declined slightly, the company reported that policies for auto insurance rose by 15% in September, although the pace earlier in 2025 was 20%.
In 2023 and 2024, auto insurers raised premiums by double digits. However, premiums declined slightly by 0.3% according to September’s consumer price report. One issue impacting insurance companies is the higher cost to fix cars that have been damaged in auto accidents.
Progressive sells policies directly to drivers
Revenue growth is likely to contract this year, but Progressive’s investments in data and technology help it remain in second place behind State Farm.
Progressive is still “the best-run” insurer for consumers and is a “wonderful company,” said Greg Locraft, co-manager of the T. Rowe Price Financial Services fund, according to Barron’s.
Investors who have held Progressive in their portfolios for many years have seen their income grow. Over the past five years, the stock jumped by 135.7%.
Telematics, which produces real-time driving data, plus additional analytics, has been a large contributor to how Progressive decides on the amount of its policies. The ability to sell its policies directly to consumers, who often comparison shop alone, had also been advantageous for Progressive.
The company’s advertising campaign that profiles Flo, a woman who appears in its television ads, has resonated well with consumers.
Shares of Progressive are discounted currently, but the company’s popularity with Americans could help the company sell more insurance policies. The auto insurance industry has many players. Progressive currently has 17% of the market share, and industry experts predict that the company could capture a larger share. Revenue rose by 20% in both 2023 and 2024 and is estimated to increase by 13% in 2025.
“Progressive is a growth machine,” said Adam Seessel, chief investment officer at Gravity Capital Management, according to Barron’s. “It’s a technology company that sells insurance.”
The company’s profit margin for auto underwriting was 12% in 2024, which is 7.5 points more than the average for insurance companies, according to AM Best, and the gap could be similar this year.
Why Buffett invests in insurance companies
Insurance companies are typically a good investment since homeowners and consumers pay premiums monthly, generating steady revenue, which is why Warren Buffett, founder of conglomerate Berkshire Hathaway (NYSE: BRK), has been a longtime investor in insurance companies. Geico, an auto insurer, has been a subsidiary of Berkshire Hathaway since 1996.
Buffett is extremely enthusiastic about insurance companies, stating that they are the lifeblood of conglomerate Berkshire Hathaway, contributing to its success or “the engine that has propelled our expansion since 1967.”
The cash flow generated by insurance companies results in stable revenue growth and profit margins.
“It’s so much fun because you get the money at the start, you know and then you find out whether you’ve done something stupid later on,” Buffett said at the 2024 Berkshire Hathaway shareholders meeting.
Progressive’s technology and consumers’ familiarity with the company from its frequent advertising are likely to draw the attention of more people and result in more drivers and homeowners switching their policies to the company.
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