AM Best: US commercial auto insurance profitability ‘will remain elusive in 2025’

By Michael Loney

April 1 - (The Insurer) - U.S. commercial auto results will improve slightly this year but remain unprofitable as carriers continue to struggle to attain rate adequacy, AM Best expects.

AM Best has maintained a negative outlook for the U.S. commercial auto segment, citing its drag on the commercial lines market, losses reverting back to historical loss levels, rising severity and frequency trends and rates failing to keep up with rising claims costs.

The segment had a net loss of more than $5 billion in 2023 and a combined ratio of 109.2%, while last year was also unprofitable. Commercial auto writers have reported a combined ratio above 100% in every year in the past decade expect 2021, when frequency dropped because of the pandemic.

“Underwriting losses continue to plague the U.S. commercial auto industry, and AM Best expects that profitability will remain elusive in 2025 and beyond,” the rating agency said in a report.

“Despite significant rate increases and changes to underwriting practices, commercial auto insurers struggle to turn a profit and have consistently reported combined ratios well over 100,” it added.

AM Best said that severity of losses is increasing because of factors such as heavier trucks, higher speed collisions and more serious injuries in accidents involving large commercial vehicles.

The rating agency believes these hurdles appear to be intensifying and threaten the segment’s profitability further. The segment also faces the growing challenge of social inflation as well as economic inflation, it added.