NEW YORK, June 28, 2017 /PRNewswire/ -- Private auto net incurred losses will increase by nearly 7% in 2017 to a new record of approximately $154 billion, reflecting elevated volume and costs of claims, according to the third annual U.S. Property & Casualty Insurance Market Report by S&P Global Market Intelligence. Auto losses soared by 13% in 2016 due to unfavorable claims experience for the underwriters, leading carriers to broadly pursue rate increases. Those rate increases are expected to lead to higher premiums for consumers in the near term, but will also lead to gradual improvement in the profitability of the business.
"Though underwriting results in many business lines will deteriorate in 2017, we expect the P&C industry to produce only a modest underwriting loss for the year," said Tim Zawacki, senior insurance research analyst, S&P Global Market Intelligence. "Needed rate increases for the personal and commercial auto businesses will begin to positively impact industry results in 2017. We expect additional improvement in those lines to take place over the next several years."
Technological innovations may result in sweeping changes for the industry over the long term. As a result of more time spent on the road by U.S motorists, and historically high loss ratios experienced by the industry in 2016, consumers should expect to pay higher auto insurance premiums.
Additional findings from the U.S. Property & Casualty Insurance Market Report include:
- AIG's large reserve charge and unprecedented reinsurance deal with Berkshire Hathaway set the stage for improved and less volatile financial results for the company. At the industry level, normalized results for AIG should help offset expected erosion in underwriting profitability for several commercial lines of business.
- Competition for business remains high, with soft market conditions prevailing in most non-auto lines in a time of robust industry capitalization. But we expect only slow improvement in investment returns from 2016's historically low result, which should encourage continued underwriting discipline.
- S&P Global Market Intelligence projects an industrywide combined ratio of 100.7% across business lines in 2017, a slight increase from 2016. Projected growth in direct premiums of 4.3% would represent an increase from 2016 levels, reflecting higher auto rates.
For additional findings and a high level summary of the report, please click here.
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SOURCE S&P Global Market Intelligence