There was some brief respite in auto insurance during the COVID-19 pandemic. As explained in Gallagher’s Spring/Summer Insurance Market Report, claims in auto associated with pandemic shutdowns were down in 2020, with the biggest reduction in commercial auto.
Through Q1 of 2022, total miles driven was almost back to pre-pandemic levels, and claims in auto returned to more or less “normal” levels. But the current risk landscape is anything but standard for commercial auto carriers.
“On the liability side, we continue to see challenges around social inflation, which is leading to larger and catastrophic claims,” said Linton “B” Puckett, VP, market relations leader for Gallagher. The Gallagher Spring/Summer Insurance Market Report states that, in particular, large jury awards in commercial auto insurance (in excess of $10 million) are becoming increasing prevalent.
“As the courts have reopened post-COVID, we haven’t seen any signs of social inflation or the rise in large jury awards slowing down,” said Puckett. “This is particularly challenging for companies with large fleets.”
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Today, there are also challenges around inflationary trends impacting loss costs, which will ultimately be felt through the premiums that carriers are charging. Supply chain disruptions and a labor shortage triggered by COVID have made it hard for automakers and repair shops to meet demand. Prices for both new and used vehicles have skyrocketed, driving up claims costs and auto insurance rates.
Companies with large fleets or poor loss history may experience more significant rate increases in the coming months, according to Gallagher. The brokerage also warned that carriers insuring large commercial fleets are looking to attach excess layers above $1 million.
So, despite a brief breathing period during the pandemic, the commercial auto market remains challenging. Puckett explained why: “I think the