It has been 11 years since commercial auto loss ratios have outperformed the greater property/casualty industry.
Executive Summary
PART 1 of THREE-PART ARTICLE. After a tumultuous decade for the U.S. commercial auto insurance industry, fleet managers and insurance providers are rethinking how road experience should be monitored, underwritten and priced with the help of accelerating technological advancements. Many of these advancements aim to directly improve road safety, and others are expanding the insurance toolbox used to segment risk.
In this three-part article, a consulting actuary from Milliman and executives from Luminant Analytics and meshVI describe how advancements in data and tech are revamping the commercial auto insurance industry.
Part 1 provides an overview of the U.S. commercial auto insurance line's historical performance and key drivers of the current market performance.
Part 2 details the vast improvements in technology and data that the industry has embraced in the last decade.
Part 3 focuses on the growth and positive performance of a recent cohort of commercial auto InsurTech startups in the last five years.
A lot has happened in that period—increasing capabilities for handheld devices, a global pandemic, the highest interest rates observed in decades—each of which impacted P/C insurance in unique ways. Despite numerous rate increases and more stringent underwriting, most commercial auto companies have struggled to improve performance as new drivers of losses continue to counteract improvements.
Commercial auto liability industry experience in 2024 is tracking similarly to 2023. At the time of this paper, only the first three quarters of data were available. Through Sept. 30, 2024, the commercial auto industry reported a 2024 calendar year loss ratio of 75.9 for commercial auto liability compared to a loss ratio of 76.6 in calendar year 2023. Meanwhile, the full P/C industry recorded a loss ratio of 62.4 in the first nine months of 2024 compared to 65.4 in 2023; however, it is worth noting that the 2024 data does not capture the impact of storms like Helene and Milton occurring in late September and early October.
Note that these loss ratios exclude defense and cost containment expenses (DCCE) as this information was not compiled midyear, while the full-year figures in the graph below do include DCCE.
In 2023, the latest full-year data available that does include DCCE, the commercial auto liability loss ratio was 84.4—almost 15 points higher than the 69.5 loss ratio recorded for all P/C lines of business.
Commercial auto losses can be broadly classified by a number of factors, including macroeconomics, the litigation environment, driving behavior or some combination of the three. Insurers have varying degrees of control over each of these categories, so focusing efforts on areas that can be influenced is critical, especially when there are limited resources available to devote to each line of business.
