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Commercial auto insurance premium & rate hikes likely to continue

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S&P Global Market Intelligence reports that commercial auto liability premiums are up 10% compared to Q2 2021, and there were also “substantial” rate hikes in the first half of this year — both of which will likely mean more cost increases for small businesses on top of supply chain disruptions and labor shortages.

“In June, commercial auto rate increases outpaced written premium reductions as only a handful of rate filings were expected to result in written premium reductions of more than $5,000,” S&P says.

Allstate, with 2% of the overall commercial market share, saw the largest direct premium growth year-over-year at 25.7%, according to S&P’s analysis. Direct premiums written for liability business increased to $11.54 billion during the second quarter – a 9.6% increase from $10.53 billion in Q2 2021, and the total commercial auto loss ratio was 70.4%. Allstate’s loss ratio was the highest at 117.8% and Old Republic International Corp. had the second-highest at 81.9%.

During Allstate’s Aug. 3 Q2 earnings call, Property-Liability President Glenn Shapiro said the company will “continue to implement a comprehensive strategy to improve profitability,” which “includes broadly raising auto and home insurance rates.”

“In the second half of 2022, we plan to file for rate increases in excess of the increases implemented in the first half of this year, which were 6.1% of Allstate brand countrywide premiums,” he said. “We’re also reducing expenses on advertising and growth investments. Underwriting guidelines have been and will be changed to reduce new business volume, where we’re not earning adequate returns. And we’re also executing claims operating actions to manage loss cost in a high inflationary environment. These actions will likely have a negative impact on policy growth.”

Progressive held 15% of the market share during Q2 and saw a loss ratio of 66.4%, according to S&P. The insurer grew its commercial lines by 12% over Q2 2021, according to its Q2 financial report. Berkshire Hathaway, which owns GEICO, and Nationwide Mutual Group were the only insurers in S&P’s analysis that saw a decrease in year-over-year direct written premiums during Q2 with declines of 1.3% and 3.7%, respectively.

In a letter to shareholders, Progressive President and CEO Tricia Griffith said core commercial auto growth “remained strong” during Q2.

“…[W]e have continued to grow our telematics book of business, which has a profitability advantage over policies that do not enroll. We know from experience, however, that our commercial business tends to fluctuate with the overall rate of economic activity, with cycles of growth and cycles of slowdowns. We have begun to see growth headwinds in our for-hire transportation business segment as the transportation freight market softens and overall economic activity slows. We will continue to respond appropriately during these changing times.”


Featured image credit: bagi1998/iStock

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