Toronto, Ontario -- The U.S. commercial auto insurance sector continues bleeding money at an alarming rate, generating over US$10 billion in net underwriting losses in just the past two years, according to a new A.M. Best market report.
The commercial auto insurance line has now posted underwriting losses for 14 consecutive years, with 2024 losses alone reaching $4.9 billion. That's significantly worse than the 11-year average of $2.9 billion annually, indicating the problem is accelerating rather than stabilizing.
Rising loss severity continues to drive the red ink, fueled by inflation, escalating replacement costs tied to advancing vehicle technology and climbing labor costs for repairs. These same cost pressures are hitting Canadian shops hard, making the U.S. market's struggles a preview of challenges facing the entire North American collision repair industry.
Despite substantial rate increases, commercial auto insurers haven't been able to offset the mounting repair costs. The gap between auto liability and physical damage coverage results has grown increasingly stark, with liability claims driving most of the losses. This divergence may push more fleet operators toward higher deductibles or dropping physical damage coverage altogether, potentially reducing work volume for repair facilities.
"One bright spot to note is that during the past decade, insurers have trimmed about six percentage points off their underwriting expense ratio for commercial auto insurance," said Christopher Graham, senior industry analyst at AM Best. "While commercial auto insurers are not recognized as often as personal auto insurers for adopting and leveraging technology through their operations, commercial auto insurers have nevertheless made some strides in improving their efficiency." However, these administrative savings pale compared to the massive claims cost increases.
The report highlights how adverse loss development has become "a constant drain" on commercial auto results and is worsening. David Blades, A.M. Best's associate director, emphasized this trend represents an ongoing challenge rather than a temporary setback.
The commercial auto sector's 14-year losing streak also demonstrates how long-term industry problems can persist even with significant rate increases, suggesting that structural changes in repair costs and claim severity may require more fundamental shifts in how insurers and repairers approach commercial vehicle damage.
