US auto insurers suffered a 1H 2022 underwriting loss of $766 million, marking it as the segment’s worst half-year result in five years, as impacts from inflation on auto repair and medical costs, as well as supply chain and labor market issues, have plagued the segment.
AM Best states that the results of the companies that make up AM Best’s private passenger nonstandard auto (PPNSA) composite reflect ongoing inflationary pressures, corresponding rate adequacy concerns and a variety of headwinds facing private passenger auto insurers.
The 1H2022 underwriting loss follows $1.3 billion in underwriting losses in 2021.
Best highlights that even though direct profitability has been deteriorating, quarterly premiums generated by the nonstandard auto composite have still been growing as insurers have been responding to loss-cost pressures.
Direct premiums written in each of the first two quarters of 2022 surpassed $5 billion and were higher than the premiums in any quarter from the start of 2018 through the end of 2021.
The higher premiums reflect the impact of rising inflation on loss costs and efforts by nonstandard auto insurers to offset the impact.
Best’s market segment outlook on the US personal automobile segment, of which the nonstandard auto insurance market is a small part, is negative given operating conditions and results.
Both mid-year pretax operating and net operating losses for the nonstandard auto composite were the worst of the past five years.
2022 results so far show an ongoing reversal of the favorable 2018-2020 underwriting and operating metrics. It expects the PPNSA’s near-term underwriting results to remain challenged with a noticeable improvement unlikely for most PPNSA carriers.
Although the performance of auto insurers continues to lag that of standard auto insurers, insurers in both markets face serious difficulties associated with rising claims costs, growing market competition and the inherent nature of insuring higher hazard private passenger auto risks.