These days it’s a good news-bad news scenario for property and casualty insurer profits. The good news is insurers have seen three years of huge underwriting profits. Bad news comes via commercial auto. As of the end of 2015, underwriting losses there have dropped for the last five.
That’s a big concern for Fitch Ratings. The rating firm calls it a “chronically underperforming product segment.”
James Auden is the managing director for Fitch. He said commercial auto underwriting losses have been significant and the combined ratio hit 109 in 2015. It averaged 106 from 2011 to last year. “The poor performance is a reflection of previous overly aggressive pricing in commercial auto and a recent extended period of heightened claims severity, particularly relating to bodily injury claims,” Auden said.
At the same time, Fitch notes, a number of carriers underwriting the commercial auto line continue to do well in underwriting even as prices drop. They fell an average of 3.1% in the third quarter of last year says the Council of Insurance Agents & Brokers (CIAB).
That’s bad news. Again back to good news, the CIAB noted that prices for all lines jumped up slightly in the fourth quarter of 2015 and the first quarter of this year.
Even with written premiums rising by 7%, losses keep the companies from keeping up. So they’ve responded with reprising and other underwriting actions. They haven’t worked.
Fitch says the market — however — is now more competitive because of flat or declining prices. So commercial auto rates will continue to rise significantly in the future until insurers get underwriting losses under control. But a win in that one — Fitch notes — is years away.
“Despite a poor overall performance and weaker industry profits, a number of companies continue to produce significant underwriting profits in this line,” Auden noted.
These are the companies doing best with commercial auto according to data collected by the National Association of Insurance Commissioners (NAIC):
• Progressive is the number-one writer of commercial auto at $2.2 billion.
• Travelers is second with $2 billion.
• Nationwide is third at $1.7 billion.
• Zurich wrote $1.487 billion and is fourth.
• Liberty Mutual’s $1.486 is just under Zurich at fifth.
On the rise is Berkshire Hathaway at $1.072 billion and it is expected to continue to improve underwriting in the line.
Source link: Insurance Journal