New data from credit ratings firm Fitch Ratings revealed that the commercial auto insurance segment has yet to recover from the sustained dip that has had the sector in its grip for the past six years.
“The US commercial auto insurance industry in 2016 reported its worst underwriting performance since 2001 and the segment continues to create a profit drag for US property-casualty insurers,” Fitch said in a statement.
James Auden, Fitch Ratings managing director, said in the same statement, “Despite premium rate increases in 2016, commercial auto insurance results continued to deteriorate as unfavourable claims trends promote continued high loss ratios and increased adverse reserve development.”
The segment continues to be plagued by carry overs of loss reserve deficiencies, Fitch added. This segment has also been slow to respond to loss trends, resulting in poor pricing.
Unlike most commercial insurance segments, where renewal premium rates have been declining, commercial auto prices are on a steep climb “at an accelerating rate” as a response to overall poor conditions, Fitch added.
However, Fitch said to look out for an improvement this year as reported accident-year loss ratios for 2016 reached 77% for the industry, which was three points better than the weakest underwriting year, in 2013. Still, profitability remains a distant spot on the horizon, Fitch further observed.
“Better data analytics and technology could boost the commercial auto insurance industry in the future as harnessing a wider body of information through development of more sophisticated algorithms and models could help improve underwriters’ risk selection and pricing,” Auden also noted.
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