Managing Risks in Today’s Commercial Auto Insurance Market

Faced with underwriting losses, the commercial auto insurance sector continues to raise rates.

MarketScout reports that commercial auto insurance rates increased 9% in the third quarter of 2021, while umbrella coverage increased 11.7%. The composite rate for commercial insurance pricing was up 6.8%.

According to Business Insurance, premium pricing has been increasing for years now – a trend that fleet managers have no doubt noticed. Nevertheless, A.M. Best & Co. says that these premium hikes have not been enough to offset underwriting losses.

Increased Crash Severity

The Insurance Institute for Highway Safety says that there were 4,119 deaths involving large trucks in 2019. This represents a significant increase compared to the low that occurred around one decade prior: in 2009, there were 3,147 deaths. The National Safety Council says that 5,005 large trucks were involved in fatal crashes in 2019, an increase of 2% compared to 2018, and a 43% increase compared to 2010.

Then came 2020 and the pandemic. Lockdowns caused traffic to decrease, but there were widespread reports of reckless driving. Crash severity appears to have increased as a result. Estimates from the NHTSA indicated that approximately 38,680 people died in motor vehicle crashes, an increase of 7.2% compared to 2019. In the first half of 2021, the NHTSA estimates that 20,160 people died in motor vehicle crashes, an increase of 18.4% compared to the 2020 figures.

Skyrocketing Jury Awards

A Florida jury recently handed down a $1 billion verdict over a crash that took place in 2017, according to FreightWaves. Although this verdict appears to have set a new record, it is part of a trend of rising jury awards. According to CNBC, the American Transportation Research Institute looked at verdicts of $1 million or more and found that the average verdict increased 1,000% between 2010 and 2018.

Fleet Owner says that nuclear verdicts – often defined as jury awards of at least $10 million – are causing insurance premiums to increase and forcing some motor carriers to shut down.

Costly Repairs

Even when fatalities and severe injuries are not involved, repairs are getting more expensive. According to CNET, new tech is largely to blame. Research from AAA shows that even repairing a bumper can cost thousands of dollars when sensors need to be replaced.

More recently, inflation and supply chain issues have added to repair costs. In one example, Repairer Driven News explains that paint companies are experiencing unprecedented rising costs for materials, and this could result in more price hikes to come.

Managing Your Fleet’s Risks

Securing coverage for your fleet is getting more difficult, so risk management is more important. By managing your risks, you can prevent losses, reduce liability, and make your company more attractive to insurance underwriters.

Keep vehicles well-maintained. Maintenance issues can contribute to crashes and increase liability exposure.
Develop and enforce policies that prioritize safe driving. Drivers should always be alert and focused on the road.
Invest in telematics technology to keep drivers safe on the road. New systems can monitor drivers for dangerous habits and suggest fixes before there’s a crash.
Pay attention to the weather. Icy roads and storms can contribute to unsafe driving conditions.
Document your safety efforts. Good documentation can help you doublecheck that no safety issues are going unnoticed. Documentation may also be helpful if there is a crash.