U.S. commercial auto insurers show improving underwriting trend, AM Best says

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U.S. commercial auto underwriting improves

Highlights

U.S. commercial auto insurers reported a $2.2 billion underwriting loss in 2025, marking a 55% improvement over the prior year.
Direct loss ratio improved to 66.1 in the first half of 2026, supported by reduced accident frequency and proactive fleet management amid softer market pricing.
Commercial auto liability posted over $4.6 billion in underwriting losses for 2025 while physical damage realized a $2.4 billion gain despite higher repair and labor costs.

Underwriting metrics improve after prolonged losses

As reported by AM Best News, citing AM Best, its new Best’s Market Segment Report says underwriting performance in the U.S. commercial auto insurance segment has reached its most favorable level in decades when the COVID-affected years are excluded. The report, titled "Commercial Auto May Finally Be Seeing Light at The End of The Tunnel," says the line has produced worse underwriting results than any other commercial property/casualty segment over the past decade, with losses recorded every year.

AM Best said the removal of the pandemic peak years, when fewer vehicles on the road temporarily supported somewhat better, though still unfavorable, results, underscores a longer-running pattern of deep underwriting losses. Even so, the segment’s $2.2 billion underwriting loss in 2025 marks a 55% improvement from the previous year, while the direct loss ratio improved modestly to 66.1 in the first half of 2026 from the same period a year earlier.

Christopher Graham, senior industry research analyst at AM Best, said commercial auto remains a hard-market outlier even as broader property/casualty conditions become more competitive and pricing softens. He said renewal price increases have moderated somewhat, but year-over-year increases are still needed, highlighting different conditions across commercial lines.

Liability pressures persist as physical damage stays profitable

The report says liability and physical damage continue to move in different directions within commercial auto. In 2025, the liability portion of the market posted an underwriting loss of more than $4.6 billion, while commercial auto physical damage generated a $2.4 billion gain despite rising repair costs for newer vehicles and higher labor expenses.

David Blades, associate director of industry research at AM Best, said technology is helping reduce accident frequency but is also raising repair costs when crashes occur. He added that commercial policyholders with more proactive fleet monitoring and maintenance have benefited from fewer preventable accidents, supporting physical damage profitability.

AM Best also said adverse prior-year loss reserve development is still weighing on the line, but less heavily than in earlier years, with overall reserve deficiency declining and the most recent accident year appearing adequately reserved. The report said Progressive Insurance Group remains the clear market leader, writing more than twice the direct premiums written of second-ranked Travelers Group, and added that insurers focused on the segment have managed through volatile conditions better than some broader peers.

The report also points to social inflation as a major factor behind pressure on commercial auto liability over the past decade. While tort reforms in Florida have delivered greater benefits in personal auto liability, AM Best said even a more limited positive effect for commercial auto insurers could offer a template for other states.

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