Insurance: Reality check

UMA Staff

ALEXANDRIA, VA – Unlike many businesses, insurance for bus and motorcoach companies is a significant expense and to make matters worse, much of the cost, the shared cost of claims that insureds share with their fellow policyholders, is largely beyond the control of the insured.  

While State Farm is not generally insurers of motorcoach companies, owners and management should take note of State Farm’s recent report for 2022 considering they are the largest insurer of auto liability and physical damage in the United States.

The auto insurer recorded the largest underwriting loss in its 100-year history for 2022 – $13.4 billion. Attributing to the loss was claims severity. Insurance companies’ actuaries and claims experts project losses as claims develop. Their projections were wrong.      

In a recent industry meeting, State Farm’s CEO Michael Tipsord stated, “We missed severity badly. We did not anticipate the inflationary pressures.”

The record underwriting losses were due to rapidly increasing claims severity and significant additions to prior accident year incurred claims.

Also noteworthy is State Farm’s earned premiums increased 10.1% in 2022. All other lines of insurance for the company combined for profitability, auto insurance was the loser.

Reality check: The current inflation woes are turning up in claim settlements and medical cost inflation has been rising twice the pace of “normal” inflation. Claims that wind up in court are increasingly wrought with hazards of substantial jury awards and reflect a “social inflation” that influences claim settlements. None of this trends well for bus and motorcoach companies.

If you own a florist or hardware store, there are likely several hundred companies willing to insure your business. For nearly four-decades there have seldom been more than a half-dozen insurance companies willing to wade into the deep-end of the pool and insure bus and motorcoach companies- a specialty niche that mandates extensive levels of underwriting and claims expertise. Smart owners have learned to choose their insurance partner very carefully.    

It seems likely that in the short term even those bus and motorcoach companies that “try to do everything right” will see some premium increase. Plan accordingly.