For over 14 years, the commercial auto insurance sector in the U.S. has faced consistent losses, and 2024 was no different. According to a recent report from insurance rating agency AM Best, the industry saw nearly $4.9 billion in underwriting losses this year, marking the 14th straight year of financial setbacks. The losses in 2023 were even higher, at about $5.5 billion.
The trouble mainly comes from commercial auto liability insurance, which suffered a significant loss of around $6.4 billion in 2024. On the other hand, commercial auto physical damage coverage performed much better. This segment posted an underwriting profit of approximately $1.5 billion and has been profitable in five of the last six years.
The report highlights a growing gap between the two areas. Physical damage insurance is holding steady with a combined ratio of 88.6 in 2024, which means it’s operating profitably. Liability coverage, however, posted a combined ratio of 113, indicating consistent losses. Since 2014, liability has posted above 100 every year, hitting 113 five times. Without some insurers using technology to cut costs, these numbers might have been worse.
One issue is that liability coverage is mandatory for many businesses, while physical damage insurance is optional. Because liability losses drag results down, some policyholders might decide physical damage coverage isn’t worth the cost or may opt for higher deductibles to lower their premiums. This could reduce the profits insurers make from the more successful physical damage side, making things harder overall.
Rising costs for repairs and labor, along with inflation, add strain to the market. Claims are also taking longer to settle, raising the risk of big jury verdicts. AM Best estimates that commercial auto liability is underreserved by $4 billion to $5 billion, which could lead to more losses next year.
Among insurers, Progressive continues to lead in commercial auto premiums. Nationwide, once a top player, dropped out of the top 20 as it shifted focus from growing premium volume to improving profits. Still, 14 of the top 20 insurers faced combined ratios above 100 in 2024, showing the widespread challenge. Sentry, Chubb, and State Farm posted particularly high combined ratios of 130, 126.2, and 123.6, respectively.
Given these ongoing losses, some insurers may start questioning if commercial auto insurance is worth underwriting, especially since it often serves as a gateway to other commercial insurance lines. The business has been a tough sector for a long time, with no clear sign of an end to the struggles.