Best’s Market Segment Report: Numerous Pressures Create Tough Terrain for U.S Personal Auto Insurers

OLDWICK, N.J.--(BUSINESS WIRE)--
U.S. private passenger auto insurers recorded an underwriting loss of more than $4.0 billion in 2021, and with a rapidly worsening loss ratio through first-half 2022, AM Best expects that carriers’ operating margins will continue to be squeezed in the near term.

The Best’s Market Segment Report, “Numerous Pressures Create Tough Terrain for Personal Auto Insurers,” states that despite the best efforts of carriers to pursue rate increases and use available pricing tools more judiciously, personal auto insurers are having difficulty staying ahead of deteriorating severity trends. The direct incurred loss ratio through the first half of 2022 deteriorated by more than 13 percentage points compared with the first half of 2021.

Full-year 2021 underwriting results for private passenger auto insurers show a reversal of favorable trends in 2018-2019 and during the pandemic. Since then, inflationary pressures, supply chain disruptions and corresponding rate adequacy issues have adversely affected claims costs. The average cost per private passenger auto claim increased by 14% in 2021 over the prior year, reaching almost $10,000 per claim, according to the report.

“Changing driving habits are among some of the fundamental causes of the rise in personal auto losses. More drivers speeding, operating under the influence or driving without seat belts have contributed to higher claims severity, in addition to other factors,” said David Blades, associate director, industry research and analytics, AM Best.

The report also shows that the top 10 private passenger auto insurers generated more than three-fourths of total industry market share by direct premiums written. Furthermore, the importance of market branding in gaining and preserving market share is highlighted by nine of the top 10 insurers also ranking among the top 10 in annual advertising expense. However, premium volume does not guarantee profitable results, as 12 of the top 20 companies posted combined ratios over 100 in 2021.

AM Best recently revised its market outlook on the U.S. personal auto segment, of which the nonstandard auto market is a small part, to negative due to significant deterioration in its reported results. Although most personal auto carriers maintain robust capitalization and sufficient liquidity, the segment’s ability to return to underwriting profitability is not expected given persistent high loss costs.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=325921.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by AM Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Michael Vallario
Associate Analyst

+1 908 439 2200, ext. 5095

[email protected]

Christopher Sharkey
Manager, Public Relations

+1 908 439 2200, ext. 5159

[email protected]

David Blades
Associate Director,

Industry Research and Analytics

+1 908 439 2200, ext. 5422

[email protected]

Al Slavin
Communications Specialist

+1 908 439 2200, ext. 5098

[email protected]

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Source: AM Best