Commercial Auto Insurance Trends in 2019 is now available!
Over the past few years, commercial auto losses have created challenges for businesses with fleet exposures. In 2016, the combined ratio for commercial auto reached a 15-year high of 110.4 percent according to Fitch Ratings. Here, we’ll look at key trends in what’s behind the losses and actions commercial auto policyholders can take to better manage on-the-road risks.
An uptick in commercial auto claims costs stems from both claim frequency and severity. Key factors driving these increases include:
Key drivers in claim frequency
An improved economy, advancements in technology, and changing social trends are introducing risks that increase the frequency of accidents and claims. Some of these risks include:
- Distracted driving. Distracted driving, whether it’s from talking on a mobile phone or via a hands-free device, using an infotainment system or GPS, or eating or drinking, is a key factor in the growing number accidents on the road. In a recent report by the National Highway Traffic Safety Administration (NHTSA), 3,450 people were killed in vehicle crashes involving distracted drivers in 2016.
Businesses face a variety of challenges, such as distracted, aggressive, and impaired driving, that negatively affect drivers’ abilities while on the road and push up the frequency of auto accidents.
—Mark Lucca, Senior Director, Commercial Auto Product Management, Liberty Mutual Insurance
- Aggressive driving. Speeding, tailgating, running red lights, and changing lanes without signaling are all examples of aggressive driving. In 2016, speeding contributed to more than 10,000 deaths and 27 percent of all fatal crashes, according to the NHTSA. This and other types of aggressive driving are common—a recent report by the AAA Foundation for Traffic Safety found that nearly 80% of drivers expressed significant anger, aggression, or road rage behind the wheel in the previous year.
- Impaired driving. Drunk and drugged driving continue to be top causes of vehicle accidents. There were almost 10,500 deaths from alcohol-impaired driving crashes in 2016 (NHTSA). And while drunk driving has decreased, the number of drivers under the influence of marijuana and other drugs is on the rise. The NHTSA’s 2013-2014 National Roadside Survey found that only 8.3 percent of drivers had positive BAC levels, declining from 12.4 percent in 2007. Comparatively, the percent of drivers who tested positive for some drug (including marijuana) or medication increased from 16.3 percent to 20 percent during the same time period.
- More miles. An improved economy translates to business growth, resulting in more vehicles on the road covering more miles. In 2017, the Federal Highway Administration reported estimated cumulative travel to be 2,946.7 billion vehicle miles. Cumulative miles driven have increased by 7.3 percent—nearly 200 billion miles, over the past five years.
Claim severity continues to rise
In addition to accident frequency, the cost of commercial auto claims continues to rise from factors such as:
- Rising medical costs. In the past ten years, insurance claim costs for bodily injuries increased 42 percent, primarily due to the increase in medical care costs to treat injuries.
- Rising auto repair costs. The cost to repair and replace commercial vehicles remains at an all-time high. Due to the increase of newer vehicles on the road, repair costs have risen 17 percent over the last ten years.
None of these trends show signs of slowing or reversing, especially with more vehicles on the road and new technology like back up cameras, distance sensors, and other safety aids making vehicles more expensive to repair.
Reining in commercial auto exposures
Commercial auto accidents can result in employee injuries, vehicle damage, and costly third party claims. Here are three ways businesses can proactively manage their on-the-road exposures and control losses:
- Promote fleet safety: Safety is a core value that all levels of management should instill with employees on a daily basis. Adopting a strong fleet management program can help protect drivers and reduce the risk of accidents. Some best practices to incorporate include:
- A standardized process for screening drivers, including reviewing motor vehicle records.
- Documented safe driving practices, such using seat belts and not speeding.
- Policies on distracted driving and scheduling.
- Using technology, like GPS and telematics, to monitor driver and vehicle activity.
- Standards for personal vehicles, including insurance requirements and vehicle condition.
- Protocols for reporting accidents.
- Put telematics data to good use: Today, the use of telematics data plays a key role in safety, unlocking insights into driver behaviors that contribute to accidents. To make the most of the data, businesses must know how to use it to improve performance. Commercial auto insurers can offer guidance and tools to help companies:
- Select telematics reporting parameters to capture the right information from vendors.
- Review data to identify aggressive driver behaviors, such as speeding, sharp turns, or sudden breaking.
- Determine the root causes of poor driving, such as fatigue, distractions, or tight delivery schedules.
- Develop action plans to improve driver performance and reduce losses.
“While telematics data can indicate that a driver is speeding, the risk manager must look beyond that to figure out why that driver is speeding and how to change that behavior.”
– Peter VanDyne, Risk Control Director, Liberty Mutual Insurance.
- Engage insurance partners to maximize results: There are also other ways commercial auto insurers can help businesses improve safety and control costs. For example, Liberty Mutual’s risk control consultants can help customers:
- Establish screening criteria for new drivers through a “driver scorecard,” which looks at motor vehicle reports and years of experience.
- Analyze telematics data and conduct interviews with drivers, management, and other stakeholders to uncover root causes of unsafe driving through its Managing Vital Driver Performance program.
- Benchmark accident frequency against expected rates (based on criteria like vehicle type, location, industry, etc.) and that of peers.
Businesses that partner closely with their insurance brokers and carriers to understand commercial auto risks – and the consultative support and tools available to manage them – are better positioned to protect their employees, fleets, and operations.
This website is general in nature, and is provided as a courtesy to you. Information is accurate to the best of Liberty Mutual’s knowledge, but companies and individuals should not rely on it to prevent and mitigate all risks as an explanation of coverage or benefits under an insurance policy. Consult your professional advisor regarding your particular facts and circumstance. By citing external authorities or linking to other websites, Liberty Mutual is not endorsing them.