Don’t expect the U.S. personal auto insurance market to continue in 2020 with the strong results seen in 2018 and likely for 2019, Fitch Ratings said in a new report.

Fitch said that “shifting market fundamentals” will likely make those stellar numbers “unsustainable” for a third consecutive year.

One bright spot: Fitch said it doesn’t expect the more substantial personal auto underwriting losses from 2015 to 2016 to be returning just yet.

The industry statutory personal auto combined ratio was 98 for 2018. As Fitch noted, this was the first year the sector had a combined ratio below 100 since 2007. Fitch expects 2019 results to match 2018 levels. but Fitch projects a return toward break-even results in 2020.

“The private passenger auto insurance market forged a strong recovery in underwriting profits in the last two years,” Jim Auden, Managing Director at Fitch, said in prepared remarks. “A return to more intense competition with flatter pricing and continued claims severity concerns will lead to future deterioration in results.”

Following several years of significant price increases, premium rate changes have now flattened considerably in the personal auto space. Fitch said. According to CPI data from the Bureau of Labor Statistics on motor vehicle insurance cited by Fitch, costs show a reduction of -0.2 percent year over year in November 2019, compared with a 5 percent increase for full year 2018. Large public auto underwriters continue to report premium rate increases in quarterly disclosures, but at lower rates than they’ve been recently.

In turn, shifts in pricing trends are leading to slower written premium growth. Industry statutory direct premiums in personal auto at nine-months-ended 2019 were up 4.3 percent compared to the same period the year before, down from 6.6 percent growth in fiscal 2018.

Fitch explained that flatter growth reduces the chance that revenue keeps pace with loss cost trends going forward. But so far, based on publicly held underwriter results, auto claims frequency trends continue favorably, but severity trends are less predictable with bodily injury and physical damage costs moving upward in 2019.

Fitch’s full report is “Personal Auto Underwriting Performance: Results Likely to Peak in 2019.”

Source: Fitch Ratings