Significant premium increases have failed to arrest a slide in US personal auto underwriting results, AM Best said in a market segment report. 

Direct incurred loss ratio in the first half of this year worsened to 75.6% from 72% from the prior corresponding period, despite a 12.9% rise in direct premiums written. 

“Worsening severity has been a primary driver of the rising claims costs and the deteriorating overall results,” AM Best said. 

“Unfavourable trends have affected both the liability and physical damage components of the US private passenger auto line.” 

AM Best says inflation, supply chain disruptions, and technological advances in vehicles have all led to increased claims costs. 

“Coupled with increased accident frequency, loss costs have increased faster than rates, creating rate adequacy challenges for insurers.” 

Last year the net combined ratio blew out to 112.2%, an almost 11-point deterioration from 101.5% in 2021, which is about 10 points over the 10-year average and median combined ratios for personal auto. 

Driver inattentiveness and riskier overall driving habits have become more problematic in the last few years, AM Best said. 

Workplace patterns have changed post-pandemic, with a larger percentage of employees working 

from home several days a week, reducing the number of vehicles on the road. Less crowded roadways have led to drivers travelling at higher speeds, increasing the risk of mishaps. 

“Distracted driving including smartphone-enabled navigation and entertainment systems, not to mention decades-old concerns about eating and drinking, affect accident trends,” AM Best said. 

“Insurers have implemented programs to enhance driver safety, but reports indicate that drivers remain distracted by smart phones.” 

AM Best-rated carriers are reassessing their personal auto portfolios and implementing steps to address selection and price adequacy concern, Associate Director Industry Research and Analytics David Blades said. 

“But the time-consuming regulatory process for rate increases, which varies by jurisdiction, has made it difficult for insurers to stay ahead of deteriorating severity trends and address rate needs in real time.”