If you run a business that relies heavily on vehicles for your daily operations, you’ve likely been watching your commercial auto insurance costs go up in recent years. For many, it’s getting harder to even find affordable coverage. What’s going on? The short answer: Rising automobile injury claim costs.
According to the 2015 Edition of Trends in Auto Injury Claims by the Insurance Research Council (IRC), a division of the American Institute for Chartered Property Casualty Underwriters, the cost of each injury claim per insured vehicle in the U.S. is on the rise. That’s inevitably pushing your commercial auto insurance premiums up, while forcing many insurance carriers to bail out of the market altogether. It’s the same in any industry – when a business can no longer make a profit selling a product, they have no incentive to continuing offering that product.
But vehicles are supposed to be getting safer, leading to fewer accidents. So why are we seeing the rise in auto injury claim costs? It’s all about severity vs. frequency.
It’s true that increased vehicle safety has led to a reduction in the frequency of auto injury claims according to the IRC report. Nearly every state in the U.S. saw a decline in the frequency of bodily injury claims from 2005 through 2015. On the other hand, every state except West Virginia saw a jump in the severity of bodily injury claims from 2005 to 2013.
It’s a bit of a double-edged sword. Safer vehicles make it possible for people to survive accidents that would have been fatal in the past. Unfortunately, many of those people are surviving with critical injuries that require lifelong care, and the cost of that care is skyrocketing.
Then there are the lawsuits and the soaring settlements and awards. Ten years ago, a $10 million claim would have been considered a large commercial auto claim. Today it’s not uncommon to see settlements of $40 million to $50 million and even higher. And rising medical costs are a huge component of those increasingly astronomical settlements. General loss costs have also increased, by as much as 8 percent in 2015.
Bottom line: your commercial vehicles are a growing liability to your business, so your safety and accident prevention initiatives are more important than ever.
When you prevent accidents, you cut down on injuries, lost productivity, vehicle and property damage and all kinds of costs and liabilities. And you just might save someone’s life.
Follow these tips to reduce commercial auto losses:
- Thoroughly screen and road test potential drivers using vehicles they will be expected to operate.
- Permit only properly qualified persons to operate company vehicles.
- Establish written rules of the road defining acceptable day-to-day use and operation of vehicles.
- If personal use of company vehicles is permitted, define who can drive and permissible personal use.
- Periodically evaluate your drivers' Motor Vehicle Records (MVR).
- Consider using telematics/GPS tracking as part of your fleet safety management program.
- Enhance driver safety awareness and performance through regular training, incentives and defined accountabilities for unacceptable performance.
- Keep all vehicles maintained in accordance with the manufacturers' requirements and establish a system to ensure drivers report maintenance issues in a timely manner.
- Teach your drivers what to do in the event of an accident, and equip vehicles with an accident reporting kit.
- Take time to analyze your accidents and reported near misses to understand the causes and minimize future mishaps.