The US nonstandard auto insurance segment posted a slight profit in H1 2024, marking a turnaround after two years of losses, according to AM Best.
The private passenger nonstandard auto (PPNSA) composite recorded $13 mn in underwriting income for H1 2024. This reflects a significant shift from the $457 mn underwriting loss seen in the same period last year.
Before these gains, the sector faced profitability challenges tied to post-pandemic pressures. These included rate inadequacy, inflation’s impact on body shop costs, rising auto part prices, higher used car prices, and an increase in attorney-represented bodily injury claims.
AM Best recently upgraded its outlook for the US personal auto insurance segment from negative to stable. The agency attributed this shift to better rate adequacy, a more favorable regulatory environment, strong risk-adjusted capitalization, and improved investment yields due to the reinvestment of maturing lower-yielding bonds at higher rates.
David Blades, associate director at AM Best, noted that the PPNSA composite’s underwriting performance has lagged behind AM Best’s private passenger standard auto composite. He highlighted differences in combined ratios as a key factor, as well as the broader personal auto line’s edge in utilizing advanced technology for claims, underwriting, and distribution.
The personal auto line also benefits from being a leader in leveraging current technology in all operational areas, including claims, underwriting, and distribution
David Blades, associate director, AM Best
Despite the improved 2023 results, the PPNSA composite still reported a net underwriting loss of $673 mn for the year, which was an improvement over the $904 mn loss in 2022.
On a quarterly basis, direct premiums written (DPW) in the nonstandard auto market have shown steady growth. Efforts to achieve rate adequacy led to a 25% year-over-year increase in Q1 2024 and a 23% rise in Q2 2024.
The PPNSA composite’s DPW surpassed $7 bn for the first time in Q1 2024 and reached $6.6 bn in Q2. AM Best emphasized that this growth highlights ongoing momentum in the nonstandard auto insurance sector.
