Commercial Auto Insurance

You should prepare for increases in your commercial vehicle insurance coverage for 2017 as accidents, injuries and costs rise for the first time in decades and insurers make up for years of low pricing.

Commercial auto insurance premiums have been trending between 6 and 10% higher since early this year and, if you’re policy comes due Jan. 1 or during next year, you may see your premiums increase. Experts say that rates are increasing in nearly all commercial auto segments – but trucking is feeling it more acutely.

The reason for the increase is that there are more accidents taking place on the roads and the costs of the claims – everything from vehicle repair to medical costs – are increasing for various reasons.

Auto insurance rates are rising at the fastest rate in almost 13 years, according to the Insurance Information Institute. The effects are being felt harder in the commercial auto insurance market than in the personal market.

That’s because commercial insurance rates have been stable for many years, barely budging despite rising costs. And now some insurers have left the market, reducing the supply of insurers in the segment, which has reduced competition and bumped up pricing.

The premium hike therefore essentially boils down to two factors: more accidents and rising claims costs.

Higher accident frequency

The increase in accidents, and in vehicular injuries and deaths, is the result of:

  • More people on the road due to cheaper fuel.
  • More people on the road because the economy has improved and more people are driving.
  • An increase in accidents due to distracted driving (mostly from texting using a smart phone or talking on the phone while behind the wheel).

One of the main contributing issues is risky behavior, which studies have found to be widespread. About 87% of drivers surveyed by the AAA Foundation for Traffic Safety in February 2016 reported that they had engaged in at least one risky behavior while driving in the past month, including using their phone or not wearing a seat belt.

Rising claims costs

According to the Insurance Research Council, the average cost of a liability claim increased 32% from $11,738 in 2005 to $15,506 in 2013. In 2014, it had reached $16,600, up 7% from the year prior.

Meanwhile, the average cost of personal injury protection claims (often referred to as no-fault claims) increased by 38.2% – from $5,802 to $8,017 – between 2005 and 2013.

Factors that are increasing costs:

  • The cost of medical care for injured parties is increasing, particularly in the commercial auto segment, as victims of car or truck crashes tend to take longer to recover.
  • As cars have become more high-tech, it has gotten more expensive to repair them. Also, more commercial vehicles than ever are being totaled, meaning the insurer has to pay out for the market value of the vehicle, because designs are often being altered to meet fuel and weight standards.
  • Prices have been suppressed in the commercial market, and there are now fewer players in the market.

What you can do

While base rates are rising and out of your control, you can double down on safe-driver training for your employees.

If you can educate your driving employees in safe-driving best practices, you will reduce your accident rates, which will be reflected in the premium you pay.

For example, motor carriers that are very safe and have good “Compliance, Safety, Accountability” scores from the Federal Motor Carrier Safety Administration, are finding premium renewal rates that are consistent.

You can also adopt advanced technology like telematics and dashcams, both of which have been shown to improve overall driver safety.

Cameras also assist insurance companies when adjusting claims.

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