Unsafe at Any Speed? Putting the Brakes on Commercial Auto Losses
Commercial auto insurers have posted an underwriting loss for 12 of the last 13 years. According to S&P Global Market Intelligence, despite the physical damage line of business improving to profitability with a sub-100 combined ratio, that was outweighed by the commercial auto liability side, whose poor performance dragged the aggregated commercial auto business to a 109.2% combined ratio in 2023.
Discussion topics include:
· Overview of the state of the commercial auto market
· What is behind the increase in liability losses
· What tools can insurers use to better manage commercial auto liability claims
· How has pricing been impacted
· What is the role of state regulation
· What emerging risks are a concern
Speakers:
Tim Zawacki, Insurance Sector Strategist, S&P Global Market Intelligence
Dan Murray, Senior Vice President, American Transportation Research Institute
Jason Kunert, Head of Claims, Amwins
Moderator: Meg Green, Senior Editor, Insurance Insider
Commercial auto in the United States is a business lines that has been challenged for many years. In fact, research by S&P Global Market Intelligence has found that the sector has posted an underwriting loss for 12 of the last 13-years.
Tim Zawacki, Insurance Sector Strategist, S&P Global Market Intelligence, commented: “Challenges have persisted for this business over the long term. We've gotten used to P&C being a pretty cyclical market, and this business has certainly been a standout in terms of its inability to generate underwriting profitability.
“I can't think of another property casualty line that has really flummoxed the industry to the extent that commercial auto has.”
There is nuance to who is making money in this space and who is not and the diverse range of business that make-up commercial auto – anything from lone delivery vans to larger haulage fleets and ridesharing - can impact the final result for insurers. Zawacki continued: “Twelve the last 13 calendar years have seen combined ratios above 100% for commercial auto overall, some carriers who specialize in this business have had a much different fate and have been consistently profitable.
“Other companies have been wildly unprofitable, and business attracts a range of participants, from the household names that everyone knows in the auto insurance business to risk retention groups and captives that focus on specific risks that may otherwise be difficult to insure.”
There are a number of reasons behind the lack of overall profitability and a key driver is the industry’s failure to get reserving right.
According to S&P Global research, loss picks are often overly conservative and the legal landscape, which is fostering high payouts to claimants, is having a negative impact. Social inflation and claims costs are also affecting underwriting profits. It all combines to drive premiums up and sees costs passed down to the end-customer.