What’s Behind Nationwide’s E&S Commercial Auto Exit? Impact on the Space
Nationwide’s recent departure from the excess and surplus (E&S) commercial auto insurance market has generated discussions within the industry. While experts acknowledge its impact, they believe it won’t reshape the entire space. Jennifer Nuest, Senior Vice President and Transportation Practice Leader at Amwins, explained that Nationwide was already exiting certain segments of the commercial auto business, such as California, before the full exit. The expectation is that various players will step in to pick up the business in different segments of commercial auto.
For instance, the trucking business is likely to see other competitors absorb Nationwide’s share. However, niche operations or businesses in regions with unfavorable legal environments may face challenges like inflated premiums or potential shutdowns. Businesses with poor safety records and high loss ratios, where there’s no improvement in safety and loss prevention, are at risk of being pushed out of the market. Clients who benefited from Nationwide’s risk management and loss prevention services may fare better.
The commercial auto insurance industry faces profitability challenges, with a combined ratio of 101.5% in 2022, according to S&P Global Market Intelligence. Claims are a significant issue, compounded by rising repair costs due to inflation, expensive technology in vehicles, nuclear verdicts, and increased accidents from post-COVID reopening.
While insurtechs leverage telematics and in-vehicle cameras to enhance underwriting, experts like Jennifer Cain caution against overreliance on these technologies. Unsustainable low rates led to market exits, and while some insurtechs use telematics data, they may lack the historical data to accurately underwrite and price policies. The inclusion of two years of COVID lockdown data, when claims decreased due to reduced traffic, adds complexity to rate calculations. Long-term data analysis and prudent underwriting practices are necessary to address these challenges effectively.
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Nationwide’s exit from the excess and surplus (E&S) commercial auto insurance market has generated industry discussions.
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Jennifer Nuest, Senior Vice President and Transportation Practice Leader at Amwins, suggests that while Nationwide’s departure is significant, the commercial auto insurance market is extensive and fragmented.
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The market’s fragmentation means that other insurers are likely to step in to fill the void left by Nationwide.
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The trucking segment, for instance, is expected to see increased competition.
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Niche businesses operating in challenging legal environments may face higher premiums or potential closure.
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Companies with poor safety records and high loss ratios may be pushed out of the market.
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The commercial auto insurance market faces profitability challenges, including rising repair costs, nuclear verdicts, and increased accidents post-COVID.
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Telematics and in-vehicle cameras have potential to improve rates but require careful underwriting practices.
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Historical data may be insufficient for precise pricing, especially given the unique impact of COVID-related lockdowns on claims.
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Insurtechs leveraging telematics and data collection have contributed to unsustainably low rates, leading some carriers to exit the market.
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A longer data history, beyond the two years of COVID lockdowns, is necessary for more accurate underwriting and pricing decisions.
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While some businesses may see potential in the data collected, the commercial auto insurance market remains challenging to navigate profitably.
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