Commercial auto is a bogeyman in the insurance world. Years of unhealthy combined ratios, sustained losses and inadequate rates have caused many carriers and managing general agents (MGAs) to slam their brakes on the market and retreat.
This contraction in the commercial auto market has resulted in a “dearth of capacity” and a consequential hardening of rates, which was “very much needed,” according to Stephen Standing, executive vice president, Trinity Underwriting Managers (TUMI) – a division of Worldwide Facilities.
“It has been a very interesting market over the past couple of years. It’s gone from far too many competitors having to battle it out through price, to an environment where there’s a lack of capacity and remaining players actually have the ability to get the appropriate rate and compete on a more sound level,” Standing told Insurance Business.
On August 01, the Insurance Services Office (ISO) put forward significant rate increases across commercial transportation. While the trucking industry has experienced rate increases for some time, the ISO’s wider-reaching effort to address poor loss ratios in commercial auto can only now “have some teeth.”
Standing explained: “Had the ISO put those rate increases forward three or four years ago, the market in general would have fought against it and the pricing would have stayed supressed. We’re in an environment now where these rate increases will have some teeth and the market can actually achieve what most would deem to be an adequate rate. It was definitely depressed for many years, and that was largely driven by the amount of competition.
“The combination of a rising tide of rate with the dearth of capacity actually makes for a really bullish outlook on the commercial transportation sector. I think there’s an opportunity that didn’t exist a few years ago for carriers, MGAs and brokers to enter the space and make a profit. There’s an overwhelming need for retail agents in the commercial transportation space right now, and that translates into us becoming more relevant for those agents. Anyone that has capacity is in demand.”
TUMI has survived and thrived throughout this challenging period in commercial auto by targeting specific and niche classes. They find solutions for classes of business that are underserved or in distress, and fill market gaps that others are retreating from. For this strategy to succeed, they need help from the agent channel, Standing noted.
“It takes a lot of communication with our agents in the marketplace about areas of distress or areas that are underserved,” he said. “We develop our products around that feedback and try to find ways to respond to our agents’ needs.”