Significant Underwriting Losses in Commercial Auto Insurance
A recent report by FreightWaves reveals a significant underwriting loss of $4.9 billion in the commercial auto insurance sector for 2024, marking the fourteenth consecutive year of losses with a combined ratio of 107.2%. AM Best has also reported that net underwriting losses have exceeded $10 billion over the past two years. Notably, 14 out of the top 20 insurers posted combined ratios above 100 in 2024.
In response to persistent challenges, the industry is adjusting by increasing rates. Trucking insurance premiums have experienced an annual average rise of 8.3% from 2017 to 2025, significantly outpacing general inflation. The American Transportation Research Institute (ATRI) highlights a 38% increase in liability premiums from 2015 to 2024, reaching 10.2 cents per mile. During the same period, the excess layer costs of $5 million to $10 million and $10 million to $15 million rose by 34% and 45%, respectively, while heavy-duty truck crash rates declined by 2.6%.
Industry insiders claim the current market pressures stem from insurers' business decisions over the past decade. Companies like GEICO and Progressive have opted for models allowing instant policy issuance based on self-reported data, bypassing detailed risk management. This became particularly evident during the 2021 freight market boom when over 109,000 new trucking companies, often single-truck operations, entered the scene without established credit or safety records.
The MCS-90 endorsement creates complexities, allowing insurers to deny claims involving undisclosed trucks involved in accidents due to misrepresentations. Federal financial responsibility filings, however, remain unchanged, sometimes leaving crash victims with unenforceable judgments against insolvent carriers. Highlighting the issue, a notable case in Mohave resulted in a $130 million loss when operators continued operating without paying premiums.
The federal liability minimum for general freight carriers, unchanged at $750,000 since 1980, should be around $2.8 million today if adjusted for inflation. This outdated figure does not incentivize thorough underwriting, as risk assessment costs often surpass premiums for small carriers. Additionally, states like New Jersey have increased minimum liability requirements for larger commercial vehicles, pushing some carriers into assigned-risk plans.
Nuclear verdicts have surged, with cases exceeding $10 million averaging $36 million in awards by 2022. Thermonuclear verdicts over $100 million reached 49 cases in 2024, contributing to a total of $31.3 billion in nuclear verdicts across industries—a 116% increase from the previous year. The Supreme Court's ruling in Montgomery v. Caribe Transport II in 2026, allowing state lawsuits against freight brokers for negligent carrier selection, may increase demand for contingent auto liability insurance.
Anomalies in FMCSA data reveal that some carriers, despite having a single listed power unit, undergo multiple inspections across different VINs. Notably, GEICO-insured hot-shot carriers reported three trucks but recorded 1,800 inspections across 11 VINs in two years, underscoring the need for improved accountability measures. The report concludes that addressing underwriting losses requires reassessing hiring processes, equipment use, and accountability protocols in the motor carrier industry.