AM Best has maintained a stable market outlook on the US personal lines insurance industry for 2020, supported by a decline in catastrophe activity, profitable underwriting, and the sector’s strong capitalisation levels.
Following record-breaking catastrophe activity in 2017 and above-average storm losses in 2018, the personal lines industry had some respite in 2019 despite threats from numerous storms.
Analysts also believe that the segment is positioned for continued success due to a number of underwriting actions that have been taken by management teams.
These include enhanced pricing segmentation, rate increases to match risks, and overall improved exposure and concentration management.
Additionally, results for the private passenger auto segment continue to benefit from a stabilisation in loss cost trends and underwriting initiatives focused on rate adequacy.
While ongoing severity trends are likely to remain elevated given medical severity and high costs for auto repairs in the US, the reduction in frequency has resulted in a general flattening of rates.
Other factors weighing into AM Best’s outlook for the sector include the influence of insurtech, which is likely to continue to gain traction in the auto market.
Here, the rating agency believes enhanced sensors will steadily allow insurers to collect more data that can be use in predictive analytics, underwriting decisions, claims reporting, and overall pricing of risks.
A significant increase in unrealised capital gains, combined with underwriting profitability and favourable investment returns, also allowed surplus to reach record level sin 2019, analysts noted.
And finally, an increased focus on data analytics, pricing segmentation, exposure management, and technology and innovation is expected to better position companies to face market pressures and changing customer demand.
