The U.S. commercial auto sector is set to produce an underwriting loss for the ninth consecutive year in 2019, as market challenges continue to offset repeated underwriting and pricing actions, reports Fitch Ratings.
The commercial automobile insurance space continues to drive substantial losses for U.S. property/casualty (P/C) insurers, recording a statutory combined ratio of 108% in 2018, marking the eighth year in a row of underwriting losses.
With just moderate results improvement expected in 2019, analysts at Fitch have said that the expectation is for another year of underwriting losses for the segment in 2019.
Despite recent and repeated efforts to improve the underwriting landscape for market participants, commercial auto is one of the weakest major commercial lines P/C segment, says Fitch.
“Pricing increases alone have been insufficient. The chronic underwriting losses in commercial auto in the last eight years reveal a need for change in several areas including risk selection, underwriting practices, and claims,” explains James Auden, Managing Director in Fitch’s Insurance Ratings Group.
Last year, the segment’s statutory direct written premiums actually increased by 13%, but increasing claims severity, most notably on bodily injury claims, has mitigated the positive impact of premium rate increases.
According to Fitch, this means that the loss ratios for the most recent accident-year remain consistent with a significant underwriting loss.
The ratings agency also highlights that a lack of adequate pricing and unanticipated claims cost increases are in part shown through loss reserve deficiencies. The commercial auto liability line has experienced annual unfavourable reserve development totalled above 7% of earned premiums for the last four consecutive years.
One area of optimism noted by Fitch is with technology, and the use of advancements in tech to improve operational efficiency and performance for commercial auto underwriters.