Direct-written premium rose 1.3 percent to close to $168 billion in 2011 compared to 2010. Shields says the industry posted a direct-loss ratio of 67.5 for 2011, up 2.7 points from 2010.

He notes that market-leader StateFarm produced a combined ratio that is estimated at around 113, and released close to $1.07 billion in prior-year loss reserves.

These indicators, he says, point to rate increases in 2012.

For homeowners insurance, direct-written premium rose 3.5 percent to more than $71.6 billion for the year. The increase indicates “that rate increases—stemming from recent years' unexpectedly high weather-related losses—are gaining traction.” Storm losses accounted for a 14.8 point increase in the direct-loss ratio to 75.8 “likely motivating continued rate increases in 2012,” according to Shields.

Finally, covering commercial lines, the industry saw its direct-loss ratio rise 8.4 points to 60, but weather-related losses do not fully explain loss deterioration for the year since losses came in areas not affected by weather, says Shields. The report suggests that the decline in the direct-loss ratio is further evidence of inadequate pricing, underscoring the need for rate increases in 2012.

Direct-written premium growth, which grew more than 5 percent in the fourth quarter and the year compared to 2010, was attributed to a combination of “economic stabilization and, increasingly, rising insurance rates.”

The report says, “We see inadequate profits—seen in the rising direct-loss ratios—as the primary catalyst for 2012 rate increases.”