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<\/div>\nCommercial auto insurance has struggled to achieve underwriting profitability, even before inflationary conditions affected property\/casualty lines in recent years. The trend has been accompanied by steady growth in net written premiums (NWP), according to the Insurance Information Institute (Triple-I), an affiliate of The Institutes.<\/p>\n
In its \u201cCommercial Auto: Trends and Insights<\/a>\u201c, Triple-I indicates the declines in underwriting profitability, despite relatively steady growth in premiums written, have been driven by several causes including that vehicles have become increasingly expensive to repair.<\/p>\n Litigation trends have also had an impact, the report noted.<\/p>\n Excessive injury and fatalities contribute to increased attorney involvement leading to higher claim-related expenses due to larger settlements and protracted litigation.<\/p>\n Nationally, commercial auto defense and cost containment (DCC) expenses \u2013 a key measure of the impact of litigation on insurers \u2013 has nearly tripled over the past decade, the report stated.<\/p>\n A recent study \u201cIncreasing Inflation on Auto Liability Insurance \u2013 Impact as of Year-End 2023\u201d, conducted by Triple-I and the Casualty Actuarial Society (CAS), found that between 2014 and 2023, increasing inflation drove auto liability losses and DCC up by a range of $118.9 billion to $137.2 billion, or 9.9 percent to 11.5 percent of the $1.2 trillion in net losses and DCC for the period.<\/p>\n The estimates for 2014 through 2019 occurred in a period of stable economic inflation, providing strong evidence that the inflationary total for those years, $21 billion, is attributable to \u201csocial inflation\u201d \u2013 excessive inflation in claims caused by, among other factors, policyholder or plaintiff attorney practices that increase the costs and time required to settle insurance claims to the detriment of consumers, the report noted.<\/p>\n \u201cIncreasing economic and social inflation continues to profoundly influence escalating insurance costs,\u201d said Dale Porfilio, FCAS, MAAA, chief insurance officer at Triple-I. \u201cThis contributes to higher prices for personal auto insurance plus the goods and services consumers buy every day,\u201d said Porfilio, a co-author of the Triple-I\/CAS whitepaper.<\/p>\n For commercial auto liability, the increase in losses and DCC was in a range of $42.7 billion to $55.8 billion, or 20.7 percent to 27 percent of the total, higher than the previous study\u2019s range of $35 billion to $44 billion.<\/p>\n According to the study, claim severity rose 78 percent from 2014 to 2023, a compound annual growth rate of 6.6 percent. By comparison, the CPI for All Urban Consumers rose less than half as fast in that time, 29 percent, a compound annual inflation rate of 2.8 percent, the report added.<\/p>\n \u201cThe decrease in frequency shows that the accident rate is not contributing to the increase in commercial auto liability losses,\u201d said Porfilio. \u201cIf anything, it is a mitigating cause. The fact that claim severity is rising faster than economic inflation indicates that insurers have faced inflationary factors that far outstrip general inflation trends.\u201d<\/p>\n Topics<\/span> Profit Loss<\/a> Auto<\/a> Commercial Lines<\/a> Business Insurance<\/a> <\/p>\n<\/p><\/div>\n Was this article valuable?<\/p>\n<\/p><\/div>\n