Signs of Trouble Seen for U.S. Commercial Auto Insurance Market

Signs of Trouble Seen for U.S. Commercial Auto Insurance Market

Despite having cause for optimism in 2021, the U.S. commercial auto insurance market shows signs of falling behind again in 2022 as losses increase, according to a new segment report from AM Best.

The sector had its best year in a decade in 2021, with a combined ratio under 100, a small net underwriting loss and strong premium growth, the company noted. Commercial auto insurers have also steadily cut underwriting expenses over the last 10 years, helping to improve results.

“For several years, insurers have been maintaining greater pricing discipline while striving to obtain more adequate rates for the exposures being presented,” said Christopher Graham, a senior industry analyst with AM Best, in a statement. “With 10 years of persistent average rate increases, the segment saw marked improvement in 2020, followed by additional, albeit smaller, improvement in 2021.”

However, in 2022, vehicle repairs have become more expensive, distracted driving continues to be a problem and rates simply can’t keep up with claim severity, according to the report. Even with premiums still increasing in 2022, rates “barely keep up with headline inflation” and may be “insufficient.”

AM Best data showed that the average loss per commercial auto liability claim has risen from $12,652 in 2012 to $25,381 in 2021.

Prior-year loss development contributed to the problem, with reserves requiring strengthening each year between 2011 and 2019. “Persistently adverse reserve development is a sign that insurers’ reserving techniques have yet to catch up with judicial trends,” the company said, adding that, up until 2019, “even new exposures were losing money.”

“Social inflation has impacted commercial auto insurance more than any other line over the past decade,” said Graham, citing nuclear verdicts against trucking firms as a key factor in rising loss costs.

The end of many COVID-19 restrictions has travel and shipping levels back to normal and may signal potential upticks in auto-related injuries and fatalities. AM Best cited the fact that vehicle fatalities increased during the pandemic despite fewer miles traveled.

“Whether 2021 was just a favorable blip or a sign of what’s to come remains uncertain,” said AM Best in the report. “And whether the first half of 2022 was merely an adjustment period as more people returned to pre-pandemic routines, or whether it represents a true return to the loss levels of the 2010s, also remains uncertain.”

For more information on commercial auto insurance, contact us today.

Comments are closed.

Table of Contents

Recents Post
Renewable Energy SOTM (1)
2024 Renewable Energy State of the Market Update
Congratulations web Header - New '24 (1600 x 900 px) (3)
Samantha Money Promoted to Partner!
Congratulations web Header - New '24 (1600 x 900 px) (1)
Laura Noderer Promoted to Senior Advisor!

This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an “as is” basis, without warranty of any kind. Baldwin Risk Partners, LLC (“BRP”), its affiliates, and subsidiaries do not guarantee that this information is, or can be relied on for, compliance with any law or regulation, assurance against preventable losses, or freedom from legal liability. This publication is not intended to be legal, underwriting, or any other type of professional advice. BRP does not guarantee any particular outcome and makes no commitment to update any information herein or remove any items that are no longer accurate or complete. Furthermore, BRP does not assume any liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Persons requiring advice should always consult an independent adviser.

Baldwin Risk Partners, LLC offers insurance services through one or more of its insurance licensed entities. Each of the entities may be known by one or more of the logos displayed; all insurance commerce is only conducted through BRP insurance licensed entities. This material is not an offer to sell insurance.

Get in contact with an advisor today to see how BKS can support you.