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Insurance - Taking back control in a difficult commercial auto insurance market

image Stan Gregory, Safety and Risk Consultant, INSURICA, San Antonio, TX

AUSTIN - Commercial auto insurance is becoming more difficult to manage each year. Rates continue to increase, and insurance carriers are limiting their appetites for anything but best-in-class risks. Before we look at what you can do to take back control of your auto insurance program, let’s take a look at the reasons behind this hard market.




1. Cell phones are huge distractions. More than one quarter of all crashes involve distracted drivers talking on phones or texting. As younger drivers are hitting the streets, this problem is continuing to grow.
2. People are driving more.
In the first half of 2016, we saw a 3.3% year-over-year increase in mileage driven, nationwide. This trend has been continuing for some time, and we are at an all-time high for mileage driven. Unfortunately, more driving translates to a higher frequency of accidents.
3. Medical costs are escalating. In fact, the rate of medical inflation is growing 1.5 times the rate of other costs. This is a big concern for insurance companies because experts agree there is no easy solution in sight.
4. Frequency and severity of auto accidents are both increasing. Claims costs can come from a rise in frequency or severity of accidents. With commercial auto, both are rising.
5. Auto repair costs are rising significantly. As the price of cars has gone up, so have the costs to repair them after an accident. With newer cars, even minor repairs can cost major bucks.
6. In 2016, auto insurance carriers in the state of Texas ran an average of a 110% combined loss ratio. Simply put, this means the commercial auto insurance industry is losing money. To make up for this, insurance carriers are tightening their driver qualifications, and rates are trending upward to compensate.
There are a few troubling things to note about these trends. Many of the trends simply do not have solutions. The insurance industry cannot do anything about more drivers on the roads, rising medical costs, or rising repair costs. Many industry experts believe the auto insurance industry will continue the pricing trends we are seeing for years to come.
    For auto insurance buyers and commercial fleet managers, the time for proactive fleet management is now. While many carriers are limiting their appetites and increasing rates, the best pricing is always reserved for customers with best-in-class fleet management programs.
    Here are six things every business should be doing to manage their fleet.
1. Hire qualified drivers. Insurance companies typically exclude drivers after three violations. Best-in-class companies will examine a potential new hire’s driving record to determine if their moving violations could result in future problems with procuring auto insurance policies.
2. Check driving records regularly. In addition to pulling MVRs for new hires, best-in-class companies will pull employees’ MVRs regularly to check for new violations.
3. Implement a robust fleet safety program. This includes documenting the program and consistently communicating the company’s expectations to all employees.
4. Adopt and enforce a company policy for personal use of vehicles. While a lot of companies have personal use policies in place, many don’t enforce the policy in a consistent manner.
5. Train your drivers. Whether your insurance agent offers decision driving training or you contract with a vendor to provide training, it’s important to train new hires and re-train existing employees using proven risk management techniques.
6. Monitor drivers and vehicles using technology. There are a variety of options available for fleet managers to monitor fuel economy, speed, hard braking, and aggressive driving. These systems may require initial an investment, but the potential insurance savings can pay for them many times over.
    Stan Gregory is a Safety and Risk Consultant and a leader on INSURICA’s Risk Management team. He has more than three decades of experience working with loss control, safety planning, and risk management for clients within the construction and energy industries. He can be reached at 210-805-5915 or sgregory@INSURICA.com.

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