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Factors Increasing Commercial Auto Insurance Rates
Exposures related to commercial auto insurance are vast, and a number of industry changes, as well as the frequency and severity of claims, have had a significant impact on carriers in the space. In fact, many carriers are finding it difficult to maintain profitability for commercial auto insurance and, in turn, are passing the uptick in cost along to insureds.

Home » Business Insurance » Factors Increasing Commercial Auto Insurance Rates

Factors Increasing Commercial Auto Insurance Rates

Exposures related to commercial auto insurance are vast, and a number of industry changes, as well as the frequency and severity of claims, have had a significant impact on carriers in the space. In fact, many carriers are finding it difficult to maintain profitability for commercial auto insurance and, in turn, are passing the uptick in cost along to insureds.
Whether they’re transporting materials and tools to worksites, hauling goods for deliveries, or driving to meet clients—companies of all kinds rely on safe and functioning vehicles to serve customers and generate profit. As such, commercial auto insurance has become invaluable for any business that operates vehicles as part of its operations.

However, exposures related to commercial auto insurance are vast, and a number of industry changes, as well as the frequency and severity of claims, have significantly impacted carriers in the space. Many carriers are finding it challenging to maintain profitability for commercial auto insurance and, in turn, are passing the uptick in cost to insureds.

It’s not uncommon for businesses to see year-over-year rate increases even when they hire safe drivers and have a clean loss record. But, the truth is that claims history is just one piece of the puzzle, and several high-level trends affect commercial auto insurance rates. This article will examine some trends driving up the cost of commercial auto insurance rates.

 

Distracted Driving Incidents

While many factors can lead to a crash (e.g., impaired driving, poor road conditions, and adverse weather), distracted driving is one of the most common causes of accidents. As these incidents have become more common, insurance rates have climbed in tandem, creating a risk management challenge for insureds and a profitability challenge for insurance carriers that sell commercial auto insurance.

Data from the National Highway Traffic Safety Administration indicates that every year, up to 391,000 people are injured, and 3,450 people are killed in crashes involving distracted drivers. Distracted driving reduces awareness, decision-making, and performance—increasing the likelihood of driver error, near-crashes, or crashes.

Distracted driving is an ongoing safety concern for organizations that use vehicles as part of their operations. This concern continues to impact the cost of coverage for businesses across the board.

 

Accident Costs

The overall cost associated with vehicle collisions has climbed significantly in recent years. While the financial impact of individual accidents can vary based on the collision’s severity, steep medical and repair costs continue to drive up the cost of claims overall.

 

Increasing Medical Costs

In general, medical costs have been rising steadily over the past number of years. Losses for bodily injury liability insurance claims increased 10% over five years alone. These increased costs have affected multiple lines of insurance, including commercial auto insurance.

Injuries for all of those involved following an accident can vary in severity. It’s not uncommon for the injuries of those involved in an accident to require multiple doctor visits or even surgery, which can extend recovery time and influence the cost of claims.

 

Increasing Vehicle Repair Costs

Technological advancements have made vehicles safer and more efficient. However, as commercial vehicles are outfitted with various sophisticated components (e.g., backup and blind-spot cameras), they are becoming increasingly expensive to repair.

According to a report from AAA, vehicles equipped with driver assistance systems often cost twice as much to repair as those that aren’t. As such, losses associated with a collision are much more substantial, leading to commercial auto insurance rate increases and numerous challenges for insurers.

 

Driver Shortages

According to the American Trucking Associations, approximately 160,000 commercial driver positions will go unfilled in the next decade. This ongoing shortage has placed a substantial burden on businesses, often forcing them to hire less experienced drivers.

Not only does this increase the potential for accidents and subsequent claims, but it has also made businesses more costly to insure. And with no end in sight to the driver shortage, businesses will need to train drivers effectively and ensure their company makes road safety a priority.

 

More Vehicles on the Road

According to industry experts, there are more drivers on the road than ever before. Additionally, industry demand is rising, and drivers are logging added miles to make deliveries and meet employer demands. This means more drivers are on the road for extended periods, increasing the likelihood of an accident.

 

Litigation Trends

Simply put, auto liability claims are increasing in frequency and severity yearly. This is occurring for several reasons, including the following:

 

  • Litigation funding—Litigation funding is when a third party provides resources to attorneys to finance a lawsuit. In exchange, the third party receives a portion of the settlement. This is becoming more common in auto liability claims and often increases the cost of litigation overall, sometimes to seven figures.
  • Claim severity—Settlement verdicts for bodily injury claims have steadily risen. As a result, attorneys are more inclined to go to trial. This extends litigation and significantly raises the cost of defending a claim.

 

These facts depict an expensive and litigious environment for businesses involved in auto liability claims. In turn, insurers have a lower appetite for risk, making it difficult for employers to secure low commercial auto insurance rates.

Whether they’re transporting materials and tools to worksites, hauling goods for deliveries, or driving to meet clients—companies of all kinds rely on safe and functioning vehicles to serve customers and generate profit. As such, commercial auto insurance has become invaluable for any business that operates vehicles as part of its operations.

However, exposures related to commercial auto insurance are vast, and a number of industry changes, as well as the frequency and severity of claims, have significantly impacted carriers in the space. Many carriers are finding it challenging to maintain profitability for commercial auto insurance and, in turn, are passing the uptick in cost to insureds.

It’s not uncommon for businesses to see year-over-year rate increases even when they hire safe drivers and have a clean loss record. But, the truth is that claims history is just one piece of the puzzle, and several high-level trends affect commercial auto insurance rates. This article will examine some trends driving up the cost of commercial auto insurance rates.

 

Distracted Driving Incidents

While many factors can lead to a crash (e.g., impaired driving, poor road conditions, and adverse weather), distracted driving is one of the most common causes of accidents. As these incidents have become more common, insurance rates have climbed in tandem, creating a risk management challenge for insureds and a profitability challenge for insurance carriers that sell commercial auto insurance.

Data from the National Highway Traffic Safety Administration indicates that every year, up to 391,000 people are injured, and 3,450 people are killed in crashes involving distracted drivers. Distracted driving reduces awareness, decision-making, and performance—increasing the likelihood of driver error, near-crashes, or crashes.

Distracted driving is an ongoing safety concern for organizations that use vehicles as part of their operations. This concern continues to impact the cost of coverage for businesses across the board.

 

Accident Costs

The overall cost associated with vehicle collisions has climbed significantly in recent years. While the financial impact of individual accidents can vary based on the collision’s severity, steep medical and repair costs continue to drive up the cost of claims overall.

 

Increasing Medical Costs

In general, medical costs have been rising steadily over the past number of years. Losses for bodily injury liability insurance claims increased 10% over five years alone. These increased costs have affected multiple lines of insurance, including commercial auto insurance.

Injuries for all of those involved following an accident can vary in severity. It’s not uncommon for the injuries of those involved in an accident to require multiple doctor visits or even surgery, which can extend recovery time and influence the cost of claims.

 

Increasing Vehicle Repair Costs

Technological advancements have made vehicles safer and more efficient. However, as commercial vehicles are outfitted with various sophisticated components (e.g., backup and blind-spot cameras), they are becoming increasingly expensive to repair.

According to a report from AAA, vehicles equipped with driver assistance systems often cost twice as much to repair as those that aren’t. As such, losses associated with a collision are much more substantial, leading to commercial auto insurance rate increases and numerous challenges for insurers.

 

Driver Shortages

According to the American Trucking Associations, approximately 160,000 commercial driver positions will go unfilled in the next decade. This ongoing shortage has placed a substantial burden on businesses, often forcing them to hire less experienced drivers.

Not only does this increase the potential for accidents and subsequent claims, but it has also made businesses more costly to insure. And with no end in sight to the driver shortage, businesses will need to train drivers effectively and ensure their company makes road safety a priority.

 

More Vehicles on the Road

According to industry experts, there are more drivers on the road than ever before. Additionally, industry demand is rising, and drivers are logging added miles to make deliveries and meet employer demands. This means more drivers are on the road for extended periods, increasing the likelihood of an accident.

 

Litigation Trends

Simply put, auto liability claims are increasing in frequency and severity yearly. This is occurring for several reasons, including the following:

 

  • Litigation funding—Litigation funding is when a third party provides resources to attorneys to finance a lawsuit. In exchange, the third party receives a portion of the settlement. This is becoming more common in auto liability claims and often increases the cost of litigation overall, sometimes to seven figures.
  • Claim severity—Settlement verdicts for bodily injury claims have steadily risen. As a result, attorneys are more inclined to go to trial. This extends litigation and significantly raises the cost of defending a claim.

 

These facts depict an expensive and litigious environment for businesses involved in auto liability claims. In turn, insurers have a lower appetite for risk, making it difficult for employers to secure low commercial auto insurance rates.

The Last Word

While it can feel like the factors influencing the cost of coverage are out of a business’s control, there are things policyholders can do to secure better commercial auto insurance rates.

Organizations should understand their exposures strongly and regularly examine the root causes of collisions and similar commercial auto concerns. Additionally, businesses should seek the help of a qualified insurance broker with a deep understanding of their operations and effective risk management strategies.

Contact an InsureGood Advisor today to learn more.

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