Insurers active in the commercial auto insurance market can expect a chaotic few months, Standard & Poor's (S&P) predicts. 

Two factors explain why achieving profitability may be difficult in this segment in the United States, the analysts say. The first is global supply chain problems. Second, the cost of repairs is increasing. As a result, S&P expects lingering losses for insurers in this market segment, despite the economic recovery

In its report Commercial Auto Insurers Face a Long Haul to Profitability as the U.S. Economy Reopens and Confronts Shortages, S&P analysts mention that the end of lockdown measures will fuel a rise in auto accidents, as workers take to the roads en masse. In 2020, Americans racked up 430.2 billion miles behind the wheel, 13.2 percent less than in 2020.

A return to historical levels is thus expected, says S&P credit analyst Patricia Kwan, a roadblocktoprofitability for insurers. What’s more, insurance companies will find it difficult to keep their combined ratio below 100 per cent, the cut-off point for profitability.

Picture to improve  

The short-term horizon may seem bleak for fleet insurers, but the long-term picture is decidedly rosier. 

In a report titled More risk: the changing nature of P&C insurance opportunities to 2040, Swiss Re foresees a bright future forcommercial auto insurance between now and 2040. The reinsurer predicts that growth in auto insurance premiums will be more limited in personal than commercial business.

The picture looks quite different for fleet insurance, specific to commercial insurance. Sharing-economy models, among other factors, will be reflected in insurers’ risk portfolio, Swiss Re says in its report.

According to the reinsurer, 27 per cent of the premiums that insurers write in auto insurance in 2040 will be for commercial business. That proportion was 23 per cent in 2020.

The overall proportion of auto insurance in insurers' portfolios will be smaller in 2040 than it is today. All the same, the market is forecast to double in size by 2040, with premiums totalling $1.3 trillion to $1.4 trillion, Swiss Re says. In 2020, premiums were $766 billion.

Premium growth will advance at an average annual rate of 1.5 per cent across all segments and markets. In contrast, insurers will benefit from technological advances that can lower accident frequency by as much as 35 per cent, Swiss Re estimates.