SMOOTHING A ROUGH ROAD: DRIVERS OF COMMERCIAL AUTO INSURANCE COSTS

The road is rough and potentially worse ahead.

Commercial auto premiums increased 2.65% in April, 2017, over the same period in 2016.  Making matters worse, auto loss costs increased 20% between 2012 and 2015, according to the Insurance Services Office.

Everyone involved with commercial auto insurance would do well to understand the factors behind this surge and what they can do to better manage exposure and expenses.

Six factors fuel the deteriorating performance of commercial auto insurance:

  • More traffic – The number of miles driven is at an all-time high.
  • Distracted drivers – ¼ of all crashes involve drivers talking or texting on cell phones.
  • Growing medical costs – Medical inflation is soaring 1.5 times faster than general inflation.
  • More accidents and more expensive crashes – Both the frequency and severity of accidents are increasing.
  • Inexperienced drivers – There is a shortage of skilled commercial drivers with good driving records.
  • Rising auto repair costs – Record US auto sales mean the roads are full of newer cars that are more expensive to repair.

Here are nine specific steps to better manage this line of insurance:

  • Implement a fleet safety program – Understand what’s causing accidents, set goals for improving performance and develop a detailed plan.
  • Enforce company policy on vehicle use – Clearly define who can use a company vehicle and create a process for approving who can drive their personal car on company business.
  • Hire qualified drivers – Professional drivers are a company’s first line of defense against accidents.
  • Consider a company fleet – Minimize the potential exposure of employees using their personal vehicles for company business.
  • Train drivers – Be sure they get the company’s total commitment to safety and its central role as a core corporate strategy never to be compromised.
  • Regularly check driving records – Set a schedule for checking driving records of all your drivers – professional and employees.
  • Use telematics – Many fleets work with telematics vendors to help manage fuel, delivery routes and maintenance. These systems can also play a key role in tracking and improving driver performance.
  • Review all crashes – Provide drivers with accident kits that help collect key information immediately following an accident.
  • Explore increasing primary auto coverage limits – Growing medical, legal and repair costs have eroded the protection provided by the current standard one million dollar coverage limit. Work with your agent to identify the benefits of increasing the primary limit and attaching to the excess policy at a higher level.

The challenges with the commercial auto line are clear.  So, too, is the route to better managing that line to protect employees, the public and a company’s bottom line.

Aug 10, 2017 from Property & Casualty 360 Degrees