AM Best: Commercial Auto Liability Lost $6.4 Billion in 2024 as Litigation Costs Outpace 14 Straight Years of Rate Increases

Commercial auto liability remains one of the least profitable lines in US property and casualty insurance, and a new AM Best special report quantifies how far claim costs are outrunning prices. Insurance Business reported on October 19, 2026 that the rating agency's report on the effect of social inflation on US liability results finds that litigation, not ordinary economic inflation, is the main driver of the gap.

The headline comparison is between claims and inflation. According to the report, first-year commercial auto liability loss payments grew at 6.4% a year from 2014 to 2024. That is more than double the 2.8% average economic inflation rate over the period. A September 2025 AM Best review put severity, the average cost per claim, at growth of about 8% annually over the past nine years. Insurers have responded with 14 consecutive years of rate increases, mostly in the upper single digits to double digits, but the article says premiums have not closed the gap.

The underwriting results show the consequence. The overall commercial auto line posted a $4.9 billion underwriting loss in 2024. Commercial auto liability alone accounted for a $6.4 billion loss, which was partly offset by a $1.5 billion profit in physical damage, the part of the line that covers damage to the insured's own vehicles. Among the 20 largest commercial auto insurers, 14 posted combined ratios above 100 in 2024, meaning their claims and expenses exceeded premiums, and 14 had underwriting losses in at least three of the past five years. The article does not give a combined ratio specific to commercial auto liability.

Reserves are a second concern. AM Best estimates that the line is under-reserved by $4 billion to $5 billion industry-wide. Under-reserving means insurers have set aside less money for claims already incurred than the claims are likely to cost, and when that is recognised, it reduces profit. David Blades of AM Best describes adverse loss development as "a constant drain on commercial auto results and is getting worse." Christopher Graham of AM Best said: "Legal system abuse comes in several forms and can have a severe impact on insurers' results."

The report points to nuclear verdicts, defined as jury awards of $10 million or more, as a defining feature of commercial auto liability claims, though the article gives no count or dollar total. It cites other data on the legal environment. Swiss Re found that annual liability claim costs peaked near 7% in 2023, a 20-year high. Third-party litigation funding, in which outside investors finance lawsuits in return for a share of any award, is a market estimated at $17 billion, of which the United States accounts for about 52%, according to Swiss Re.

Some reforms show an effect. The article cites Florida's HB 837, after which auto glass lawsuits fell from 24,720 in the second quarter of 2023 to 2,613 in the second quarter of 2024, according to Milliman. That is one example of how a change in law can reduce litigation, though it concerns glass claims and not the large injury claims that drive commercial auto liability losses.

The buying side has also changed. The article cites WTW data from 2023 that 55% of large, complex clients bought umbrella and primary liability cover from the same carrier, up from 37% in 2015, and that average umbrella limits for those structures fell to $11.2 million from $20.1 million. Lower limits mean the insurer pays less when a large verdict comes, and the business keeps more risk or must buy additional layers elsewhere. The data are from 2023 and the article does not say how much they have changed since.

For insurers, the implications are about discipline. The report suggests that rate increases alone have not been enough, which means insurers must also be selective about the fleets they write, raise attachment points and manage claims more actively. For fleet operators, it means continued pressure on premiums and terms,. Marsh's third-quarter index, published October 21, shows US casualty rates rising 6% in the quarter, which is consistent with the pressure AM Best describes.

Social inflation is the term insurers use for claim costs rising faster than general inflation because of changes in the legal and social environment, such as larger jury awards, wider theories of liability, litigation funding and attorney advertising. The term covers developments that raise the cost of settling injury claims after the accident itself has happened. It is not a single measurable item, which is why reports like this compare claims growth with economic inflation to estimate its size. The 6.4% annual growth in loss payments against 2.8% economic inflation is one such comparison, and it implies that the gap compounds over a decade. The figures come from AM Best's report as summarised by Insurance Business, and the original report should be consulted for definitions, the full dataset and the methodology behind the reserve estimate.