Best’s News & Research Service - September 08, 2022 09:38 AM (EDT)
Best’s Market Segment Report: AM Best Revises Outlook on U.S. Personal Auto Insurance Segment to Negative
- September 08, 2022 09:38 AM (EDT)
Oldwick //BestWire// - AM Best has revised its market segment outlook to negative from stable on the U.S. personal automobile insurance segment, citing a significant deterioration in carriers’ results as of second-quarter 2022, driven by ongoing inflationary pressures and corresponding rate adequacy challenges.
In its Best’s Market Segment Report, “Market Segment Outlook: US Personal Auto,” AM Best estimates a deterioration in the private passenger auto liability loss ratio through the first half of 2022 of more than 11 percentage points to 71.5, from 60.1 in the same prior-year period. The auto physical damage loss ratio also spiked upward by approximately 16 percentage points.
“Many carriers continue to pursue rate adequacy in response to post-pandemic lockdown frequency and severity levels, but their ability to stay ahead of current trends has been a challenge,” said Richard Attanasio, senior director, AM Best. “The timeliness and effectiveness of sought-after rate increases has been varied based on regulatory jurisdictions.”
Previously the regulatory response to rate adequacy needs has not been a significant barrier to generating adequate operating results. However, according to the report, the magnitude of rate need has grown, challenging carriers’ ability to maintain their adequate operating results. Although inflationary trends eventually will plateau as supply chain and labor challenges wane, a significant amount of uncertainty about the duration of this rate-challenged environment remains.
The growing use of telematics and usage-based insurance may help address loss frequency, as insurers can measure driving behavior or implement additional product innovations such as per-mile insurance. However, this is unlikely to have a meaningful impact over the near term.
“Given the persistence of increasingly high loss costs, the segment’s ability to return to underwriting profitability in 2022 appears highly unlikely,” said Attanasio.
The report also notes that investment market volatility has pressured results, although many auto insurers tend to hold high-quality investments with a long-term investment horizon, and therefore are unlikely to realize these losses.
To access the full copy of this Best’s Market Segment Report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=323729 .
AM Best also has revised its outlook on the U.S. personal lines insurance segment to negative from stable. To see that market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=323724 .
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 New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.