For Auto insurers, the rate is there but where’s the profit?
Much like we’ve observed in the Homeowners’ market, Personal Auto in general has been seeing steady rate increases. However, while Homeowners is expected to achieve its third consecutive year of underwriting profits in 2015, Personal Auto has stubbornly remained at a combined ratio of just over 100 during that time.
Combined ratios in Personal Auto for publicly held insurers are slightly higher in 2015 versus the prior year, Fitch Ratings notes in its “2016 Outlook: U.S. Property/Casualty Insurance.” For the industry in aggregate, the ratings agency adds, “Personal Auto statutory results were mired at a modest underwriting loss from 2010 to 2014 and are unlikely to materially change in 2016.”
“Stronger underwriters like Progressive consistently hit their 96 combined ratio target, but the industry as a whole is not making money in Auto,” Jim Auden, Fitch’s managing director, tells National Underwriter Property & Casualty. While insurers are getting rate, Auden explains, that increase ends up offset by rising claims.
Auden says it’s difficult to pinpoint a reason for the increased claims costs, which had typically been a matter of severity in the past but also included higher frequency in the 2015 third quarter — but more miles driven, along with lower gas prices, certainly have contributed.