Keeping Your Commercial Auto Insurance Under Control

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Keeping Your Commercial Auto Insurance Under Control

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Commercial auto insurance rates are on the rise, and you can expect this trend to continue. Why is this happening? In a recent Insurance Journal article, Fitch Ratings said commercial auto has become a “chronically underperforming product segment” following five consecutive years of underwriting losses. Insurance carrier annual statement data reveal a 2015 loss ratio of 109 percent, meaning that for every $1 of premium charged, carriers are paying $1.09 in claims costs and underwriting expenses. The average loss ratio from 2011 to 2015 was 106 percent, Fitch Ratings says.

Multiple dynamics are driving these poor results, including rising claims frequency and soft pricing in the insurance market. In addition, loss severity has increased significantly, especially for losses involving bodily injury. An Oct. 14 Wall Street Journal article describes “nuclear verdicts” in which “juries award tens or even hundreds of millions of dollars to families of accident victims.” Such staggering court decisions make the cost of risk difficult to predict.

Given the long-term underperformance and increased unpredictability of the trucking line, insurers are starting to take action. The two largest writers of the trucking-for-hire business, Zurich Insurance Group and Lexington Insurance Co., exited the space in 2016—although both continue to offer coverage to companies that operate trucks on a not-for-hire basis. This void in the market has allowed the remaining carriers to impose rate increases of 10 to 30 percent or more.

As carriers look to improve their results, the commercial auto line will continue to harden. You can expect carriers to seek continued rate increases and implement more stringent underwriting or risk-selection criteria.

These four factors can help you keep your commercial auto insurance expenses under control.

Focus on driver selection and fleet management.
The drivers and the fleet you put on the road are key considerations when an insurer assesses your commercial auto risk. That’s why you must have stringent driver-selection criteria. Continue to monitor driver records after hire, and implement a continuous driver training program. When assessing your fleet, the insurer will take into account the age of your trucks and your preventive maintenance program. It will review Federal Motor Carrier Safety Administration information on your fleet—including SAFER and CSA results—and other publicly available information.

Invest in safety technology.
Insurers like to see fleet management and safety technology such as telematics systems or services, in-cab and exterior cameras, systems that track real-time data and driver behavior, and rear-view cameras and sensing equipment. Studies show that telematics and other new technologies reduce the frequency and severity of losses. Monitoring drivers improves driver behavior when it comes to complying with speed limits and reducing hard-acceleration and hard-braking events, saving fuel. Other benefits include tracking routes, charting more efficient routes, and lowering miles driven across the fleet, which reduces fuel and maintenance costs and contributes to lower claims.

Know your loss experience.
Your loss experience affects your premium by determining your experience modification factor, and it could affect your ability to procure competitive coverage at all. Work with your broker and claims adjuster to stay on top of your losses, and make sure all claims stay on track and do not languish.

Work closely with your insurance broker.
Review any application and supplemental information your broker plans to submit on your behalf to ensure its accuracy. Insurers will use the information to glean the pricing factors that will determine your premium. Ask your broker how many carriers he or she is approaching and why those carriers were selected. If a carrier asks to visit your operation as part of the underwriting process, welcome them and advocate for yourself.

As a final note, consider requesting several deductible options to determine the trade-offs between first-dollar coverage and carrying a deductible on your auto liability and your auto physical damage policies.    


Dan Curran is senior vice president and underwriting officer for Willis Programs (Portsmouth, N.H.), which underwrites RecycleGuard, the ISRI-sponsored insurance program. Reach him at (603) 334-3027 or RecycleGuard has prepared this article for informational purposes only. It is not intended to provide legal advice. Readers should not rely on this document or act upon any of the information it contains without first consulting competent legal counsel.