It's not a good time to be in the commercial auto insurance market, according to a report released Monday by SNL Financial.
Case in point: The second quarter of 2014 marked the seventh straight period of “unfavorable claims development” for National Interstate Insurance, forcing the insurer to strengthen its loss reserves by $20 million in the quarter. What's more, total adverse prior-year claims development reached $28.1 million in the quarter.
What's going on? It's simple: there are not enough qualified truck drivers to go around. As a result, inexperienced drivers, who in past years might not have made the cut, are now being hired and put out on the road under their employers' commercial coverage. This has led to more accidents and an increase in claims across the board.
And there's more. Keefe Bruyette & Woods analyst Vincent DeAugustino says that underwriting basics went “out the window” in the aftermath of the financial crisis, leading many insurers to focus their businesses on long-haul and heavy-duty vehicles instead of more predictable local delivery policies. Now that those heavy-duty industries are struggling, they're dragging the carrier markets down with them.
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