According to an S&P Global Market Intelligence analysis, the three of us in the top 20 private US auto insurers have seen their loss ratio declined by double-digit percentage points year-over-year in the second quarter.
Market leader State Farm Mutual Automobile Insurance Co.'s loss ratio weakened from 41.3% a year
ago to 70.1%, the biggest change since the epidemic-induced lockdown in 2020,
when more people began driving across the country. State firms' direct premium
writing has shrunk from 0.7% to 10.38 billion.
Lockdowns increase profitability for auto insurers, which the American Property Casualty Insurance
Association said in 2020 provided more than $ 14 billion in refunds and credits
to policyholders for reducing driving during epidemics.
The nearest competitors GEICO Corporation and Progressive
Corporation have increased their losses ratio from 50.8% and 43.5% to 73.3% and
65.8% respectively. GEICO logged a second-highest premium of $ 8.94 billion in
the most recent quarter, up 14.5% from a year earlier. Progressive was a near
third after its direct premium increased by 6.5% to 8.91 billion.
Wells Fargo analyst Alice Greenspan said in a research note that the trend of higher intensity is hurting the insurance industry, affecting private auto companies. Although the frequency for most personal auto players has not returned to the 2019 level, the intensity has increased compared to two years ago.
Berkshire Hathaway Inc. A quarterly filing states that in
the first six months of 2021, GEICO's claim frequency was higher for all
coverage, with property losses ranging from 11% -12%, physical injuries 13%
-14%. Range, personal injuries in the 16%-to-17% range and collisions in the
21% -22% range. The average claim intensity in the first six months was higher
for coverage of property damage in the range of 2%-to -3%, for coverage of
collisions in the range of 10% -11%, and for physical injury coverage in the
range of 10% -13%.
Keefe Burette and Woods analyst Meyer Shields believe that
Progressive's "increasingly cautious" personal auto pricing and
marketing positions are appropriate because normalizing driving and increasing
demand pressures the core loss ratio to cost. Shields said the near-term impact
should include a growing increase in policies until most competitors similarly
recognize and respond to the pressure of the loss ratio.
Analysts also believe that Progressive will continue to
reduce its near-term advertising spending, with the possibility of a large
reduction where its proposed rate increase was rejected.
Allstate Corporation reported a 69.4% loss ratio for the
second quarter, well above the 48.7% recorded a year earlier, while its direct
premium increased by 14.5% to $ 6.50 billion. In the company’s latest earnings
call, CFO Mario Rizzo said the auto property loss gross frequency increased
47.3% from the previous quarter but was 21% lower than in the same period in
2019.
"Automatic severity continues to increase compared to
the previous year's quarterly and pre-epidemic periods, largely driven by mixed
changes in the impact of rising inflation, both in the case of more serious,
high-speed auto accidents and used car parts and replacement costs."
According to a transcript of his statement.
The CFO says Allstate seeks to implement targeted price increases
to "maintain attractive auto insurance returns."
Kemper Corporation reached its second-largest loss ratio at
83.7%, up from 56.8% a year earlier. Joe Lacher, CEO of the company's
second-quarter earnings call, said both the "rapid reopening" and
"environmental challenges" have led to an increase in the frequency
and intensity of claims.
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Wells Fargo Greenspan expects a "tough
environment" for private auto
insurers in the short to medium term, as losses are likely to be higher.
Chip shortages, which are driving higher used and new car prices, as well as
rising labor costs, have affected the trend of intensification.
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