- Nearly all of the biggest U.S. personal auto insurers reported subpar financial performance for the second quarter of 2022, according to an S&P Global Market Intelligence analysis.
- There are numerous variables that have contributed to the trend of increasing loss ratios for insurers.
- As a result, premium rates are under pressure to rise.
- The loss ratio calculates the percentage of premium dollars that an insurer uses to cover claims.
- The following are the causes of auto insurers’ subpar economic performance:
- • As accidents become more severe and frequent, insurance losses increase.
- • As a result of the increased number of traffic-related deaths and injuries, lawyers are becoming more involved in claims.
- Supply-chain challenges are causing an increase in supply-chain problems as well as rising auto prices, replacement part prices, and labor expenses.
- More expensive auto repairs may result from safer and more modern vehicles.
“The private automotive industry was hampered by the consequences of inflation on the cost of vehicle repair and replacement.
This total ratio increased from 92.5 percent and 98.8 percent in 2019 to about 101.5 percent.”
The difference between claims, expenses, and premiums obtained from insurers is known as the combined ratio.
After the close call by the private auto business in 2021 that brought the industry to breakeven, we predict it to push the entire combined ratio into negative territory in 2022. A combined ratio of less than 100 implies an underwriting profit and above 100, a loss.
At the beginning of the 2020 pandemic, auto insurers returned $14 billion to policyholders as cash refunds or account credits since they thought there would be fewer accidents during the economic lockdown.
Despite the economic lockdown in 2020 causing a substantial decline in insurers’ personal auto loss rates, these ratios have progressively increased to surpass pre-pandemic levels.
More drivers are anticipated to return to the roads in 2022, continuing the current trend.
This demonstrates the seriousness of the pandemic’s impact on road safety in the United States.
Despite a decline in traffic deaths, they have risen over time.
Nearly 43,000 traffic fatalities occurred in the United States in 2021, a 16-year high.
Traffic fatalities increased when “daily life was interrupted in March 2020,” according to Steven Cliff, administrator of the National Highway Traffic Safety Administration (NHTSA).
As we had hoped, these patterns are not only for 2020.
According to NHTSA figures, 9,560 people died in car accidents in the first three months of this year.
This represents a 7% increase over the same time in 2021.
Insurers must take into account costs that are not related to accidents on the roads.
In research on vehicle insurance affordability that was just released by the Insurance Research Council, it was noted how attorney participation can increase costs and, ultimately, policyholder premiums in states with the least amount of auto coverage. The NHTSA statistics might assist you to comprehend the pressure for auto insurance rates to rise because attorneys are more frequently involved in cases involving physical harm.
The IRC, like Triple-I, an associate of The Institutes, notes that over the past 30 years, consumer expenditure on auto insurance has grown more slowly than the median household income (see chart below).
Because access to transportation is so important, the availability and price of auto insurance are important factors in consumer spending.
Triple-I will keep you updated on developments in this important sector.