The commercial auto insurance sector in the U.S. is facing another tough year, according to a recent report from AM Best. For the 14th year in a row, commercial auto insurance has recorded an underwriting loss. In 2024 alone, these losses totaled nearly $5 billion, adding to more than $10 billion in losses over the past two years.
The trouble is largely coming from commercial auto liability coverage, which saw an underwriting loss of around $6.4 billion in 2024. This contrasts sharply with commercial auto physical damage coverage, which has been profitable most years recently, posting about $1.5 billion in profit this year. Physical damage has stayed on a positive track with a combined ratio below 100 since 2017, while liability has struggled with a combined ratio above 100 every year since 2014, hitting around 113 in both 2023 and 2024.
One issue AM Best highlights is that liability insurance is mandatory for businesses, but physical damage coverage is optional. Because liability costs keep rising, some companies may decide to skip physical damage coverage or opt for higher deductibles to save money. This could harm insurers who rely on the profits from physical damage coverage to balance out losses from liability.
Inflation, higher costs for vehicle replacement and labor, and longer claims handling times have all made this market harder to manage. The longer claims stay open, the greater the risk of costly payout verdicts. AM Best estimates that commercial auto liability reserves may be off by $4 to $5 billion, which could mean more losses ahead.
Looking at the top commercial auto insurers, Progressive remains the largest, but Nationwide has dropped out of the top 20. Nationwide’s decline comes from a strategy to focus on profitable business rather than growth. Fourteen of the top 20 insurers posted combined ratios over 100 in 2024, with Sentry, Chubb, and State Farm seeing particularly high ratios of 130, 126.2, and 123.6 respectively.
With mounting losses, some insurers might start questioning whether staying in the commercial auto market is worth it, especially as they weigh access to other commercial lines against ongoing underwriting losses. For now, the commercial auto market looks like it will continue to challenge carriers in the near future.