Why commercial auto rates are rising and what you can do

By Higginbotham on June 22 , 2018

Rising commercial auto rates

It’s no secret that commercial auto rates are on the rise. Commercial auto insurers have been reporting poor results since at least 2016, and the trend shows no signs of slowing. Fleet managers are left wondering why their rates are increasing – and what they can do to keep the trend from hurting their bottom line.

The Problem: High Claims, High Costs

Commercial auto rates are rising because commercial auto insurers are struggling.

According to the Best’s Market Segment Report titled “Commercial Automobile Segment Struggling to Keep Pace,” the top 15 commercial auto liability insurers had a direct loss ratio of 69.4 percent in the third quarter of 2017, compared to 66.5 percent one year prior, meaning that more of the insurers’ money is going to claims.

Claims are increasing. Part of the uptick in frequency can be blamed on the sheer number of vehicles on the road. A stronger economy is leading to an increase in the number of miles driven. The more people drive, the more likely they are to experience a claim.

Vehicles are more expensive. It doesn’t help that vehicles now come with backup cameras, sensors and other expensive add-ons. A small fender bender can end up costing thousands to repair, contributing to the rising cost of claims.

Distracted driving is also often viewed as a culprit in the rise of claims. The Federal Motor Carrier Safety Administration (FMCSA) bans drivers of commercial motor vehicles from using hand-held mobile devices to call or text. Many states have also passed laws to prohibit texting while driving. Nevertheless, distracted driving has become a ubiquitous hazard. 

Natural disasters can also hurt insurers. The 2017 hurricane season was a particularly devastating one for the United States, with Hurricane Harvey soaking Texas before Hurricanes Irma and Maria caused additional damage. All those flooded cars result in claims.  

The Solutions

Although increased claims are leading to higher rates across the board, companies can take steps to keep their own claims as low as possible.

One way to do this is to promote safe driving.

  • Help drivers avoid drowsy driving. According to the National Sleep Foundation, drowsy driving can be as dangerous as drinking and driving. Crashes involving drowsy driving may go underreported because it’s often difficult to prove that a driver was drowsy.
  • Eliminate distractions. Texting while driving can increase a driver’s risk of being in a crash, a near-crash or an unintentional lane departure 23.2 times, according to the FMCSA. Companies should have a written policy that clearly defines the company’s rules on the use of electronic devices and driving distractions. An effective policy should include driver training, monitoring and enforcement.
  • Educate drivers on other aspects of safe driving, such as not speeding, not following too closely and being prepared for weather conditions.

Technology can help too.

  • Advanced safety technology features such as lane departure warning, blind spot monitoring, auto braking and similar collision avoidance systems are becoming more prevalent and have proven effective in reducing accidents.
  • Telematics provides another way of encouraging safe driving. As a fleet manager, you can’t be in the vehicle with your drivers, but with telematics, you can monitor their driving habits. According to Business Fleet, telematics tools can send out alerts when drivers do something unsafe, such as speeding. One company with a fleet of around 1,100 vehicles reduced accidents by 20 percent in one year.
  • In-vehicle cameras can help identify the cause, sometimes exonerating the driver following an accident. This is what happened when a man claimed a tow truck rear-ended him, but the dashcam footage showed the man stopping for no reason and then backing up into the tow truck, according to the Sun Sentinel.
  • Dual facing cameras can also help identify potential driver behaviors that may have contributed to the accident. This is information can be helpful in identifying and correcting at-risk behaviors before an accident occurs.

When rates go up, strong risk management strategies are more essential than ever. Working with an independent agent with access to multiple carriers can also pay off. Visit our Higginbotham Risk Management page to learn more about how we can help you combat rising rates.


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