18 January 2018 11:30
Photo : Freepik
After several years of combined ratios in excess of the bar 100% and not decreasing, the us market of auto insurance has shown signs of improvement in 2017, reveals an analysis of the firm’s rating A.M. Best.
In fact, in the third quarter of 2017, the combined ratio of the industry was down three points compared to the third quarter of 2016.
Decrease in the frequency
Despite an increase in the number of kilometres travelled, due to the economic conditions improved, and the unemployment rate and gasoline prices low, A.M. Best says that the frequency of accidents is down. This is due to an increase in the price of a barrel of crude oil and the desire of insurers to increase the rates for automobile insurance.
Insurers Allstate and Progressive have reported declines of 8% and 4% in the third quarter of 2017, while Berkshire Hathaway has stated that the frequency for its subsidiary, GEICO is stabilized. «Despite the decrease, insurers must continue to work on the factors affecting the frequency, or driver distraction, the legalization of marijuana, and natural disasters,» explain the analysts.
The gravity still on the rise
However, the severity of the accidents, meanwhile, is still on the rise, stresses the analysts at A. M. Best in their report. Between 2014 and 2016, the severity has increased accelerated from 6.8 points, » and does not show signs of slowing down.»
This growth is explained by an increase in the purchase of new vehicles and the increase of the cost of repair, but it would be there as a part of the problem, the report says. The number of deaths per 100 000 people has also increased in 2015 and 2016, the first time since 1994 and 1995.
In the Face of the increase in the severity of road accidents, the insurers have decided to increase the rate aggressively in 2017. Some have argued that the rate should be appropriate to the end of the year, reports A.M. Best.
«The companies have preferred a subscription closer to market shares, even if that means losing clients with folders with large losses and a higher frequency. Insurers that have not implemented rate increases important may face an adverse selection and will likely need to increase rates in the future. «