A strengthening economy, leading to cars being driven more and further, has resulted in an increase in insurance claims punching a $113 million hole in core earnings for
Hartford Financial Services Group. Core earnings for the three months ended September 30, dropped 24% to of $364 million compared to $477 million in the third quarter 2014.
The company's share price plunged 7.6% on Standard and Poor’s 500 Financials Index on the back of the news, which Hartford said was largely due to unfavourable PYD (prior year loss and loss adjustment expense reserve development) in the commercial auto liability line as a result of increased claims severity predominantly in the 2010 to 2013 accident years.
“The increase in automobile frequency, which emerged during third quarter 2015, is likely correlated to stronger economic trends, including higher miles driven,” the company said.
Hartford is not alone. It has been recently noted that auto insurers have been hit by rising insurance claims as vehicle owners drive more miles. Both
Allstate Corp. and Geico have said they are seeking to raise rates to counter the trend developing in correlation with an expanding economy. The rate hikes were announced in August in the wake of “more frequent and costly claims.”
