Best’s Market Segment Report: U.S. Nonstandard Automobile Writers Maintain Positive Momentum

The U.S. private passenger nonstandard automobile segment sustained its positive momentum through mid-year 2019 in terms of premium growth and operating profitability, according to a new AM Best report.

A new Best’s Market Segment Report, titled, “Nonstandard Auto Writers Maintain Positive Momentum,” states that the improved performance starting in 2017 by AM Best’s composite of nonstandard auto writers followed nearly a decade of unfavorable results. This continued in 2018 as the composite experienced a 9.0% year-over-year increase in direct premiums written (DPW) to $10.8 billion, and the combined ratio improved by nearly three percentage points to 105.2 from 108.0 in 2017. The composite’s first-half 2019 combined ratio has shown continued improvement, and the DPW increase also has expanded into the first half of 2019, reflecting the aggressive rate actions of recent years. Stabilized loss frequency for private passenger automobile insurance overall, along with a rise in average rates for private passenger automobile risks, helped spark some of the recent improvement despite loss severity trends moving in a negative direction.

According to the report, although the composite has not generated an underwriting profit since 2006, it has generated pretax and net operating earnings in seven of the last 10 years, including the last two in a row. In addition, through the first six months of 2019, the composite has continued to experience increases in both its pretax and net income compared with the same period in the previous year.

AM Best’s outlook for the U.S. personal automobile industry, which includes the nonstandard automobile market, is stable, and is driven by the robust risk-adjusted capitalization of most writers in the personal automobile segment, as well as ongoing benefits from the use of data analytics and other technological advances, which are aiding risk selection, underwriting, rate-making and claims handling efforts. Nonstandard insurers should be able to use these tools to set more-appropriate premiums for their unique client base. The nonstandard automobile insurance market is a niche market in which coverage typically is offered to drivers that present higher risk of loss. This category might include either very young or elderly drivers, drivers of high-powered sports cars or custom-built cars, and drivers that either have poor driving records or have committed multiple moving violations.

The report notes that some individual insurers have yet to identify and commit to new and more-precise forms of data and methods of analyzing data and trends to make better, more-informed underwriting and claim-handling decisions. AM Best believes innovation can set up all property/casualty insurers, including private passenger nonstandard automobile companies, for future success. Smaller, less advanced private passenger nonstandard automobile writers that lack scale or sophistication will find maintaining or building market share difficult.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=292524.

AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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