Apparently nothing has changed within the last several months to change AM Best’s negative outlook on the U.S. personal lines insurance segment.
Tuesday the insurance industry rating agency said it was maintaining its view, first revised in September, primarily because of “significant deterioration” in financial results for the auto line of business.
“Through the first nine months of 2022, personal auto liability and physical damage loss ratios deteriorated relative to year-end 2021,” said Rich Attanasio, senior director at AM Best, in a statement. “Given the persistently high loss costs, a return to underwriting profitability for the auto segment over the near term appears highly unlikely.”
The auto line continues to struggle with rate-adequacy as inflationary pressures increase loss cost severity, AM Best said. The regulatory environment, higher reinsurance costs and catastrophe exposure are each strong headwinds for the line.
Hurricanes like Ian in late September have recently headlined damages in the auto insurance industry but AM Best said the frequency and severity of secondary perils such as tornadoes, wildfires, and winter storms have “increased substantially.”
“Insurers throughout the segment continue their efforts on exposure management, strategic agency management, and enhanced reinsurance programs that capture aggregate risks, with varying degrees of success,” AM Best said.
The negative outlook for the personal lines segment indicates the rating agency expects negative market trends to continue to impact insurers but not all companies operating in the segment have a negative outlook, it said. However, carriers without expertise or those slow to adopt technology and data analytics to bolster underwriting, claims-handling, and ratemaking capabilities “likely will face ratings pressure.”
Photo: A car flood by Hurricane Ian. (Billy Schuerman/The Virginian-Pilot via AP)
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