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Tuesday, 30 June 2020 20:20

Report: U.S. Commercial Automobile Insurance Segment Records Decade-Worst Underwriting Loss in 2019

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The U.S. commercial automobile insurance segment’s underwriting losses deepened to $4 billion in 2019, the segment’s worst loss in 10 years and a continuation of a decade-long trend of worsening underwriting results, according to a new AM Best report.

A new Best’s Market Segment Report, “U.S. Commercial Auto Writers: Profitability Remains Elusive,” states the commercial automobile insurance line of business has not generated a combined ratio under 100 since 2010.

 

The segment’s combined ratio deteriorated by 1.4 percentage points in 2019 to 109.4, driven by a nearly 2 percentage-point increase in the incurred loss & loss adjustment expense (LAE) ratio.

 

Despite double-digit, year-over-year increases in earned premiums, the growth in incurred losses and LAE has outpaced earned premium growth.

 

Moreover, LAE continues to grow as claims are going through costlier litigation from social inflation and instances of litigation financing.

 

According to the report, the COVID-19 pandemic may give the commercial automobile writers some much-needed breathing room for the segment’s high frequency and severity levels.

 

Reduced road traffic from shelter-in-place requirements has resulted in fewer automobile accidents; however, although accident frequency may decline, severity potentially could rise because of vehicles colliding at higher speeds. Under typical traffic conditions, the presence of other vehicles on the road results in all vehicles driving at slower speeds.

 

Ride-share claims may decline as well, although claims from meal or grocery delivery services could increase.

 

Automobile insurers have made concerted efforts to raise rates and improve price adequacy, and have been pushing for rate increases for several years.


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