Why Commercial Auto Rates Are So High and What You Can Do About It

5-minute read

It’s frustrating, we know. No matter how infrequently you file a claim, regardless of how many safety training sessions you organize, your commercial auto insurance rates just keep rising.

The problem isn’t you. It’s societal and economic trends writ large. Things have gotten so out of control that, even with roughly three years of consecutive and often stiff, double-digit rate increases, commercial auto insurance carriers are still frequently finding themselves in the red.

We have a few tips to help but first, here’s a quick rundown of some of the reasons commercial auto insurance costs keep rising:

Distracted Driving Incidents

Distracted driving is one of the most common causes of accidents nowadays. According to the National Highway Traffic Safety Administration, about 3,500 Americans are killed in crashes involving distracted drivers every year. That is nearly 9% of all crash deaths. Not all distracted driving accidents involved smartphones, but even the use of hands-free devices while driving is contributing to distracted-driving accidents.

Repair Costs

Commercial auto insurance rates just keep rising, regardless of your safety record or how infrequently you file a claim.

Think about all the technology now built into our vehicles, everything from multiple sensors for collision avoidance, automatic braking, and parking assistance. Car & Driver magazine found that 40% of the value of a new car purchased in 2020 was related to these sophisticated, onboard electronics. In other words, we’re not just replacing a bumper anymore after a crash. We’re replacing high-cost hardware, such as cameras and sensors, as well as paying the higher labor costs for technicians skilled in installing these items.

Medical Costs

With healthcare costs rising steadily year after year, it’s not hard to see the correlation between medical costs and commercial auto insurance premiums. Simply stated, when someone is injured in a car accident, the resulting medical costs today can be far greater than what they were in previous years.

Social inflation

Blame (or credit, depending on your point of view) the personal injury attorneys for this. The average verdict size for lawsuits involving a truck crash increased nearly 1,000% from 2010-2018, rising from $2.3 million to $22.3 million.

This trend – termed “social inflation” – is not only affecting long-haul, for-hire trucking. Grocery operations, retail stores and other businesses with trucking and warehouse operations are seeing it, too.

So, what’s driving social inflation? An increasingly anti-corporate culture fueled by a perception that businesses — particularly large ones — have the deepest pockets around.

This means juries are likely to have fewer reservations when it comes to awarding big damages. In this environment, so-called nuclear verdicts (awards of $10 million or more) have become all-too common.

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.

This, not surprisingly, increases the potential for accidents and subsequent claims.

Securing Affordable Coverage

While it can feel like the factors influencing the cost of coverage are out of your control, there are ways policyholders can secure better rates. A few tips:

  • Make sure your driver safety programs include an emphasis on distracted-driving policies.
  • Establish suitable driving schedules to avoid driver fatigue. Encourage drivers to take regular breaks on long hauls. (This is easier said than done, we know.)
  • Make sure you hire qualified drivers by using motor vehicle records (MVRs) to vet drivers' experience. Resist the temptation to hire drivers with an unacceptable driving record. And review their MVRs regularly to ensure they’re maintaining good driving records. Define the number and types of violations a driver can have before they lose their driving privileges.
  • Consider technology solutions, such as telematics, to strengthen and supplement other loss-control measures.
  • Examine your Federal Motor Carrier Safety Administration BASIC scores to identify gaps in your fleet management programs, if applicable.
  • Determine whether you should make structural changes to your commercial auto policies by consulting with your insurance broker.

That last point is especially important because the trends driving auto rates are unlikely to ease anytime soon. We can’t say this enough:

Keeping your broker informed about any changes in your risk profile early in your renewal period means giving underwriters the time they need to give your renewal the consideration it deserves.

The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. An employee-owned organization, we’ve been providing our clients with the confidence to face whatever lies ahead for more than 100 years. For more information, contact us online or call 877-440-3304.

 


This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.

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