U.S. Commercial Auto Insurance Endures Continuous Underwriting Losses in 2024

The U.S. commercial auto insurance segment continues to experience significant underwriting losses, contributing over $10 billion in net losses to the property and casualty (P/C) sector over the past two years, as highlighted in AM Best's recent market segment report. This segment has now sustained underwriting losses for 14 consecutive years, with total underwriting losses reaching $4.9 billion in 2024, marking a worsening trend compared to the past decade's average annual loss of approximately $2.9 billion.

Despite persistent challenges, the industry has achieved some operational improvements, notably a reduction of about six percentage points in underwriting expense ratios over the past ten years. While commercial auto insurers are less frequently recognized than personal auto insurers for technology adoption, incremental efficiency gains have been realized through operational enhancements.

The report underscores a notable divergence between auto liability and physical damage insurance results. Although underwriting expense ratios for these coverages have improved comparably by roughly three percentage points in recent years, liability coverage consistently incurs higher net loss and loss adjustment expense (LAE) ratios. This disparity influences insureds' purchasing decisions, with many opting out of physical damage coverage or selecting higher deductibles to manage premium costs.

Rising loss severity remains a critical factor undermining profitability, driven by inflationary pressures, increased vehicle replacement costs due to technological advances, and elevated labor expenses related to repairs. Even substantial rate increases have failed to counterbalance these escalating claims costs. Adverse prior-year loss reserve development continues to exacerbate underwriting performance, presenting ongoing challenges for commercial auto insurers.

Overall, the commercial auto insurance segment's underwriting difficulties and loss trends highlight sustained market pressures. Insurers face a complex environment requiring continued focus on pricing adequacy, loss reserve accuracy, and operational efficiency improvements to mitigate risk exposure and financial strain within the sector.