PERSONAL AUTOMOBILE INSURANCE
Disparate Rate Filing Rules Pressuring Personal Auto Rate Adequacy, IRC Says
MALVERN, Pa. //BestWire// - Achieving rate adequacy is becoming harder for personal automobile insurance carriers as processes to approve filings have become increasingly cumbersome since 2010, the Insurance Research Council said.
Between 2010 and 2023, the average number of days it took to approve a rate filing increased 40%, according to an IRC study of common rate filing measures across the United States. The council said there were roughly 10,200 rate filings each year without much variance.
In addition to taking longer, there was a 10-point increase in the frequency of rate requests that are returned with smaller changes that requested, the IRC said. The severity of difference in requested and approved rates increased two points.
The IRC also said the number of filings being withdrawn increased 40% since 2010.
During the study period, direct written premium for personal auto carriers increased 93% to reach $317 billion, the IRC said, noting 2023 saw the highest change with a 14.3% increase. Despite the growing DWP, carriers experienced underwriting losses in 11 of the 14 years studied.
The IRC said there was a moderate to strong correlation between net underwriting losses and premium shortfalls within state and across time.
Weather trends, inflation and changes in driving behavior can drive unexpected underwriting results, the IRC said. Carriers depend on timely rate approval requests to brace themselves from these known unknowns.
“Ultimately, these protracted processes are causing more disparity from timely and necessary rate increases by insurance carriers to achieve adequate rate and helping push the industry toward a less competitive landscape," said Dale Porfilio, president of the IRC and chief insurance officer at the Insurance Information Institute.
Attempts to gain additional comment from the IRC were unsuccessful.
Commercial auto carriers are struggling as much as their personal line counterparts, a recent AM Best report found (BestWire, Nov. 13, 2024). The segment incurred a $5 billion net loss in 2023 and results for the first half of 2024 show further deterioration.
“The level of deterioration in 2022 and 2023 was notable, although it was due partly to the artificial improvement in results in the prior two years, owing to fewer private passenger and commercial vehicles on the road because of the COVID-19 pandemic,” David Blades, associate director, AM Best, said of commercial auto results. “This is reflected in our negative outlook for the segment, which we issued in March 2024.”
(By Steve Hallo, senior associate editor, BestWire: Steve.Hallo@ambest.com)