Thanks to higher surplus levels and favorable risk-adjusted capitalization in early 2021, the US Personal Line Insurance segment has been able to navigate this year's challenges, which include average catastrophic activity, rising pre-epidemic frequency, and return to increasing trend.
Looking ahead to 2022, rating agency AM Best maintains a
stable market segment outlook in the US personal
line insurance industry. AM Top analysts point to the strong risk-adjusted
capitalization of the segment, underwriting action by limiting homeowners' line
of instability, and accelerating the use of technology in epidemic environments
as a cause of perspective.
Best's Market Segment
Report, "Market Segment Outlook: US
Personal Lines," shows that the segment's risk-adjusted capitalization
levels remain strong, further supporting positive cash flows and favorable
liquidity positions.
Although many companies stopped price increases at the
beginning of the epidemic, they resumed rate action towards the end of 2020 and
continued throughout 2021. Higher prices were needed, as catastrophic activity
increased in 2020 and was above average in 2021. Along with various other
underwriting actions such as exposure management and extended reinsurance,
carriers were able to limit the impact of the catastrophic loss in 2021.
During the epidemic, technology initiatives to significantly
improve the underwriting and pricing tools of private line insurers have
increased significantly, the report said. Insurers are seeing a trend of
adverse intensities, as well as automatic demand frequency, rebound as the
industry faces major supply chain disruptions and high inflation, leading to
higher costs for materials and equipment.
"In recent years, best-editor auto and homeowners'
insurers have invested significantly in technology to improve their
underwriting and pricing tools. Advances in predictive modeling and price
analysis, as well as the use of third-party data, have provided carriers with
even greater opportunities for profitable growth, "the report said.
AM Best suggests that innovative use of technology and data
analysis to strengthen underwriting claims management and rate-making is the
key to achieving profitable goals. Analysts predict that Insuretech will
continue to grow in both the auto and homeowner’s markets.
Although several factors support this part, personal
line writers also face the challenge of moving forward to 2022. These include a
return to the auto loss frequency pre-COVID level and an increase in intensity
while maintaining premium trends. Insurers face a growing number of potential
catastrophes and increasingly problematic claims from secondary hazards.
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Another challenge is rising reinsurance costs, which the
report warns could put pressure on operating performance as well as balance
sheet strength. "Early carriers may struggle to pass on these higher costs
to their customers due to fears of losing market share and barriers to
regulatory restrictions in certain states," AM Best concludes.
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