The larger private passenger automobile segment posted a second consecutive year of underwriting profits that narrowed to a 98.7% CR in 2019.
The Pandemic
Economic Uncertainty from the ongoing coronavirus pandemic is substantially affecting the insurance industry from an underwriting and investment perspective. Personal lines insurers are most affected by the decline in risk exposures tied to changes in economic and social activity, including reductions in miles driven that reduces near-term claims frequency, boosting near-term profits.
Unprecedented Premium Return Actions
Auto insurers’ response to this shift includes premium refund and rebate actions that totaled over $11 billion as of July 2020 and growing. These efforts still likely are outpaced by a near-term reduction in loss costs that will lead to strong personal auto profits in 2020. This short-term success, combined with the inherent competitive and regulatory pressures of the auto business, may hinder needed pricing and profit actions when auto risk exposures return to previous norms. Claims severity uncertainty remains a constant for auto writers.