Competition Increases in Commercial Auto, But Not Too Much-Yet

By most accounts the commercial auto insurance market nationally is stable to softening. Rates may be going down a little in some areas, staying the same or at least not going up very much in others. However, some pockets of the country may see a continued hard market due to conditions in a particular state.

Regarding the auto insurance market as a whole, said Claire Wilkinson of the Insurance Information Institute, “we’re in a period of increased competition in the auto market. [I.I.I.] put out a study earlier this year where we said the cost of auto insurance is expected to rise by just 1.5 percent in 2005.”

Speaking specifically to the commercial auto market, Wilkinson said indications are that it may be softening somewhat. She noted that a survey conducted by The Council of Insurance Agents & Brokers for the second quarter of 2005 showed that 53 percent of commercial auto accounts had experienced premium decreases this year of 1 to 10 percent.

Wilkinson said the commercial auto market with $26.7 billion in premiums accounted for 6.2 percent of all property/casualty premiums in 2004. “As a comparison, private passenger auto accounted for 36.5 percent or $156.7 billion,” she said. All other P/C lines, with $245.6 billion in premiums, represented the remaining 57.3 percent of the P/C market.

“I’m really not hearing much about availability problems for commercial auto this year,” said Dave Golden, commercial lines manager for the Property Casualty Insurance Association of America. “From an affordability standpoint the hard market certainly is over, with regard to increases over prior year.” Golden noted, however, that he has not seen “indications of a significant softening in terms of rates going down in the commercial auto line this year.”

According to William Kampf, commercial auto marketing manager for Drive Insurance by Progressive, the market “seems to be getting a little softer.” Still, Kampf said, in some states it remains “pretty hard, they won’t see rate decreases.” He noted that Gulf States like Florida, Alabama and Mississippi, along with Arkansas, New Mexico, Nevada and Michigan-states with higher than average loss ratios are not likely to see rate reductions.

Cleveland, Ohio-based Progressive, one of the largest commercial auto insurers in the U.S., generated nearly $1.4 billion in net written premium through September 2005, a figure that represents a 12 percent growth in earned premium over the same period last year.

Gray Scott, president of Sacramento, Calif.-based wholesaler TransCal Associates, agreed that the commercial auto market is “pretty stable” currently. “We’re not in a cycle right now, at least not an extreme one,” Scott said. “The amount of competition is not too low or too high.” He added, “there’s always a dynamic.” He noted that as competition increases and the P/C market in general cycles, rates in the commercial auto market will “probably go down.”