Best’s Market Segment Report: US Nonstandard Auto Insurers Aim for Improved Underwriting Results

The U.S. nonstandard auto insurance segment continues to experience poor results, although the first-half 2023 underwriting loss of $333 million was an improvement over the $773 million loss seen in the same previous-year period, according to a new AM Best report.

The Best’s Market Segment Report, “Nonstandard Auto Insurers Aim for Improved Underwriting Results,” states that the results of the companies that make up AM Best’s private passenger nonstandard auto (PPNSA) composite reflect persistent rate inadequacy concerns, as well as inflationary pressures that have contributed to rising claim costs. The adverse results are lingering despite efforts to use available data tools and technology to effectively address increased loss costs and loss severity trends, as well as achieve greater rate adequacy.

Although improved underwriting results remain elusive, according to the report, the push for premium adequacy has resulted in record-setting quarterly premium volume, with direct premium written (DPW) eclipsing $6 billion for the first time in a single quarter in first-quarter 2023.

“The need for higher premiums demonstrates the prevailing effect of inflation on loss costs and the efforts of nonstandard auto insurers to catch up with, if not get ahead of, those negative trends,” said David Blades, associate director, Industry Research and Analytics, AM Best. “These efforts may result in some progress in offsetting higher claim costs, partially mitigating the recent upsurge in the composite’s combined ratio and worsening underwriting losses.”

The first-half 2023 underwriting loss follows $1.5 billion in underwriting losses in 2022. AM Best’s market segment outlook on the U.S. personal automobile segment, of which the nonstandard auto insurance market is a small part, is negative given operating conditions and results. The report also notes that historically, the complexities of insuring higher-risk policyholders have contributed to the nonstandard insurance composite’s results being weaker than that of the standard private passenger auto market.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=338045.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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