web analytics
Home | Columnists | Insurance | Insurance - Why are your commercial auto rates increasing?

Insurance - Why are your commercial auto rates increasing?

image Jeremy Sandusky, Partner, MMA-Southwest, Dallas, TX

DALLAS - From ready-mix suppliers and aggregate haulers to contractors with large automobile or truck fleets, businesses nationwide are seeing profit margins narrow because of escalating commercial auto insurance rates. The bad news is that the trend has no signs of slowing, given the myriad factors that are driving up costs. The good news is that companies can take proactive measures to reduce losses and mitigate risk.

    The two primary factors driving auto losses are rising medical costs resulting from accidents, and an increased number of miles driven.    
Loss of Focus
    Distracted driving is having a severe impact on commercial auto lines. The number of gadgets beckoning for drivers’ attention means people are focusing less on the road, and more on the technology that surrounds them. In fact, during daylight hours, more than 660,000 drivers across the country are using a mobile phone or fiddling with an electronic device while driving, according to data from the National Highway Traffic Safety Administration. As a result, eight people are killed and nearly 1,200 injured every day in the U.S. in crashes related to distracted driving, the Centers for Disease Control and Prevention reports. Not surprisingly, the number of distracted driving claims has skyrocketed, as well.   
Higher Repair Costs
    When an accident does occur, the cost of repairs puts additional pressure on insurance carriers, who pass on the expense to businesses in the form of higher premiums. Newer model cars, vans and trucks have more expensive parts, like rear-mounted cameras and side sensors. So, a small fender bender can end up costing thousands to repair. Add to that the impact of hail losses in Texas and other parts of the Southwest on these newer, more expensive vehicles, and the cost of claims becomes a significant problem for insurance carriers. In fact, the industry commercial auto combined ratio for Texas was 112.6 percent in 2015, more than five percentage points worse than the countrywide rate of 107.4 percent.
Strategies to Reduce Losses
    Businesses that have drivers on the road can take proactive measures to help reduce the number and cost of claims and put downward pressure on rising commercial auto rates. The first line of defense is a good offense, which means hiring qualified drivers with a clean track record, and implementing a fleet safety program. Documenting the training requirements, maintenance schedules, mobile device use policy for drivers, and other safety program components provides a clear and objective reference resource and sets expectations for everyone involved.
    Likewise, companies need to hold drivers accountable for safety. When one MMA-Southwest client found he was continually dealing with auto losses, he started charging employees part of the deductible. After the drivers had to put up their own money to cover the cost of claims and repairs, his losses went way down. The business owner also implemented a zero-tolerance policy for drivers who had been with his company for less than three years. If a driver had an accident during this probationary period, they lost their job. In short, safety is a culture, and it starts at the top. That means continually communicating to drivers that safety is one of the most important things in your company, so they begin to take it seriously.
    Monitoring drivers with telematics can also help foster accountability. Tools like the Lytx Drivecam® video telematics safety program can help modifying driver behavior. For example, if the footage shows the driver’s tendency to continually slam on the breaks, he may not be paying attention while on the road—an issue that can be brought to the driver’s attention during a safety review. Similarly, telematics can help identify other risky practices, like speeding, cutting off other vehicles, and running stop signs, giving employers the opportunity to hold drivers to higher standards of safety. Drivecam footage of accidents can come in handy when filing a claim—including admitting responsibility and closing a claim quickly for accidents in which the company’s driver clearly was at fault.
    Most major commercial auto insurance carriers offer helpful materials to guide loss control efforts, including model fleet safety plans, driver selection tools, and vehicle accident kits. By taking proactive steps to improve driver selection and training and promote a culture of safety, businesses can minimize losses from auto claims, while doing their part to keep premiums down and make our nation’s roads safer.

Need a Reprint?

Author Info

Kim Estes austineditor@constructionnews.net