The Commercial Auto Insurance Market Grapples With 3 Key Issues In The Final Quarter of 2023
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By Kim Matthews, UW Mgr., Commercial Auto
Influenced by a number of factors, the commercial auto insurance market over the past several years has experienced high claim losses and rate increases. As we enter the final quarter of 2023, the following three issues will continue to impact the commercial transportation market and will likely extend into 2024.
“[Social inflation] is likely to drive a higher percentage of claims with attorney involvement, which tends to be costlier for insurers.”
– Source: S&P Global
1. Economic Headwinds
Automakers and their suppliers continue to struggle with high inflation, rising interest rates, ongoing supply chain issues, and unpredictable fuel and commodity pricing. In addition, they must also deal with challenges associated with the labor shortage and lack of trained drivers. According to PWC, these economic headwinds will likely affect the commercial auto insurance industry well into 2024 – further impacting profit margins and revenue growth.
2. Loss Frequency & Severity
According to Risk Management magazine, loss frequency in the commercial auto insurance sector over the past two years has substantially increased due primarily to incidents involving distracted drivers.
The trucking industry is also being impacted by greater loss severity due to escalating auto parts and labor costs. This situation is exacerbated by the fact that more companies are investing in advanced technologies and adding new equipment, such as dash cameras and radar sensors, which makes repairing and replacing vehicles even costlier.
In addition, the increase in nuclear jury verdicts being fueled by social inflation and the fact that courts are trying to clear their backlog of cases since the pandemic, has left insurance carriers particularly cautious about writing new commercial auto liability accounts, according to the latest U.S. Property and Casualty Insurance Market Report by PWC. The report goes on to note that more commercial auto insurance carriers are being warned about the recent proliferation of social inflation driven by the spike in motor vehicle crashes and fatalities. “[Social inflation] is likely to drive a higher percentage of claims with attorney involvement, which tends to be costlier for insurers.”
3. Rates
All of the above factors could have a lasting effect on the demand and profitability of commercial auto insurance as we move into the new year and, in turn, negatively impact rates. Experts predict that most commercial auto accounts that continue to maintain solid loss controls and have a favorable loss history should expect an approximate 10% premium increase in 2024.
According to PWC, these economic headwinds will likely affect the commercial auto insurance industry well into 2024 – further impacting profit margins and revenue growth.
Conclusion
As we move closer to the end of the year, brokers serving the commercial transportation industry should prepare their clients for shifts in rates and coverages as carriers continue to struggle with key issues such as larger claim losses, social inflation, unsafe driving behaviors and the ongoing driver shortage.
For many companies, this means developing a comprehensive safety program that addresses ways to mitigate some of these risks. This may include examining existing loss control practices, revisiting reporting valuations, and exploring alternative risk transfer options.
As the commercial auto insurance transportation industry continues to be challenged by these key issues, it is increasingly important to work with an insurance company that has the expertise, risk management services and wide market reach to help you best serve your clients.
Kim Matthews is Underwriting Manager of Commercial Auto at BTIS. To learn more, email kmatthews@btisinc.com
Builders & Tradesmen’s Insurance Services Inc.
Part of the Amynta Group, BTIS is a nationwide insurance intermediary with a small-business attitude, and several small-business-preferred classes underwritten by multiple A-rated carriers.
If you are a broker with small-to-medium-sized business owner clients, we invite you to learn more about our programs that feature a variety of coverages to fit their individual needs. To learn more about our commercial auto markets or other insurance products, please explore our website.
For additional information, visit www.btisinc.com or call (877) 649-6682