What's Happening?
AM Best has reported that the commercial auto insurance segment in the U.S. continues to face significant challenges, with underwriting losses persisting for the 14th consecutive year. The segment has accumulated over $10 billion in net underwriting losses in the past two years. Despite rate increases, loss costs have outpaced them, particularly in commercial auto liability, which posted a $6.4 billion underwriting loss in 2024. The divergence between profitable physical damage coverage and loss-making liability coverage poses a risk to insurers.
Why It's Important?
The ongoing losses in commercial auto liability highlight the difficulties insurers face in maintaining profitability in this segment. The divergence between physical damage and liability coverage could lead to insurers reassessing their strategies, potentially impacting the availability and pricing of commercial auto insurance. The under-reserved liability segment, estimated to be $4 billion to $5 billion short, poses a risk of further poor results. Insurers may need to adopt new technologies and strategies to mitigate these challenges and improve efficiency.
What's Next?
Insurers are likely to explore new technologies and strategies to address the challenges in commercial auto liability. The adoption of technology to improve efficiency and risk assessment may become more prevalent. Insurers may also reconsider their approach to commercial auto insurance, balancing profitability with access to other commercial lines. The industry will need to adapt to rising costs and longer claim resolution times to prevent further losses.
