What’s going on in commercial auto lines? | Canadian Insurance

What’s going on in commercial auto lines?

Commercial auto losses have been worse than expected for The Travelers Companies Inc., and company officials are not exactly sure why.

“It’s a line that has been challenged from a profitability perspective for a while,” Travelers chairman and CEO Alan Schnitzer said during a recent earnings call about the company’s worldwide results. Some causal factors may include inexperienced drivers or more traffic on the roads, he said.

“The fact of the matter is, it’s hard to isolate it to one or two things that we could pull out of our data and say, ‘It’s this,’” Schnitzer said of commercial auto. “It’s hard to get to the causal factor.”

Canadian insurers have been citing distracted driving and the increased use of safety technology (such as cameras and sensors) in vehicles as key causes of increasing claims severity. Speaking at the 2018 Insurance Brokers Association of Ontario (IBAO) in October, one insurance company executive reasoned that the many issues plaguing personal lines auto right now would eventually filter into the results in commercial auto lines as well.

Commercial auto and asbestos losses were trouble spots cited in the company’s financial results for the three months ending Sept. 30. Overall, the net income of Travelers more than doubled, from $293 million during Q3 2017 to $709 million, during the latest quarter. All figures are in U.S. dollars.

Although its combined ratio in business insurance improved 9.3 points – from 109.8% in Q3 2017 to 100.6% in the latest quarter – Travelers officials reported some headwinds in both asbestos-related liability claims and commercial auto.

New York City-based Travelers, Canada’s ninth-largest property and casualty insurer, reported Oct. 18 it had “higher than expected loss experience” in U.S. commercial automobile “for recent accident years.”

In Canada, federally regulated insurers collected about $3.6 billion in commercial auto premiums in 2017, and paid out $2.5 billion in claims, with an overall claims ratio of 70.3% for Canadian insurers and 83.2% for foreign-based insurers writing commercial auto insurance in Canada.

That’s an uptick from 2016, when Canadian-based federally regulated insurers collected about $3.4 billion in commercial auto premiums, but paid about $400 million less in commercial auto claims. Claims ratios in commercial auto were lower in 2016, with Canadian-based insurers reporting a ratio of 66.6%, while foreign-based insurers writing commercial auto in Canada fared much better at 55.43%.