The U.S. commercial automobile insurance segment saw big rate jumps in the first three quarters of 2017, but they may not be enough to reverse underwriting losses, A.M. Best said in a new report.
Average rates increased by 5.4 percent, 6.1 percent and 7.3 percent in the first three quarters of 2017—the largest consecutive quarterly increases since rate hikes began in third-quarter 2011, according to the Best’s Market Segment Report, titled “Commercial Automobile Sector Struggling to Keep Pace.”
The hikes came as insurers worked to offset the rise in losses and improve profitability, but it is unclear yet whether those increases will be enough to reverse the loss trend, A.M. Best said. Over the first three quarters of 2017, the U.S. commercial auto insurance sector showed further deterioration, and its results continued to negatively impact the P/C industry’s bottom-line results, A.M. Best noted.
But while commercial auto insurers are enhancing underwriting measures and raising rates to boost rate adequacy, they are facing a separate challenge from rising claims frequency because more commercial vehicles are on the road as the economy rebounds.
According to A.M. Best, the direct loss ratio of the top 15 commercial auto liability insurers through third-quarter 2017 deteriorated to 69.4 from 66.5 during the same period in the previous year.
What is more, adverse reserve development also led to regular increases in net underwriting losses over the past six years, as commercial automobile underwriting losses grew to slightly more than $2.9 billion in 2016 from $744.8 million in 2011, according to the report.
Still, the lead underwriters among commercial auto insurers are well capitalized and have strong balance sheets, the report noted. Direct premiums written continue growing, and the top writers remain the same regularly. According to A.M. Best, the top 15 writers by direct premiums written had a 51.6 percent market share through Q3 2017, up 7.6 percent from the previous year.
More pain is to come, A.M. Best predicts, due to other factors such as distracted driving and lawsuits.
Source: A.M. Best