US P&C prices drop while motor rates rise

Commercial pricing remains weak in 2017 while auto insurance rates continue to increase, according to the latest Moody’s annual rate change and trend survey.

"We expect breakeven pricing in commercial casualty lines in 2017 for the third year in a row, partly offset by mid-single-digit increases in commercial auto," Jasper Cooper, vice president at Moody's.

Despite annual pricing increases since 2010, Moody's expects the commercial auto line of business to remain unprofitable owing to elevated frequency and severity trends as well an anticipated reserve deficiency. While commercial auto profitability should marginally improve this year and next with pricing increases outpacing loss cost trends, underwriting losses will likely continue, according to Moody’s.

For personal auto, the ratings agency expects a pricing increase of about 7 percent in 2017, which will improve the line's profitability.

"Increases in accident costs began in Q4 2014 or in 2015 due to increased miles driven, driver distraction from handheld devices, and higher repair costs as many newer vehicles have sensors and cameras in or near the bumpers," Cooper said.

"As accident avoidance technologies improve and become more widespread, we expect that frequency trends will shift back to their long-term average of negative 1%-2% over time."

Homeowner insurers expect moderate pricing increases this year, in line with cost inflation. Insurers anticipate higher rebuilding costs in 2017, which could reflect expectations that a tighter labour market is leading to higher construction costs, according to Moody's.

In contrast, insurers of commercial property lines expect rates to decrease 1.5% in 2017 amid abundant capacity, relatively low catastrophe losses and favourable reinsurance pricing with expanded terms and conditions. Insurers that write catastrophe-exposed commercial property lines say risk appetite has declined this year as business falls below profitability targets and alternative capital providers increase market share.

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