Commercial Auto Insurance Market Trends
If your company has tried to renew its commercial auto insurance lately, you already know the market is hard. If you haven’t, be prepared. Pricing for primary commercial auto insurance has been on the rise steadily for the last ten years, with no clear leveling off in sight. We cannot fully realize the total impact of COVID-19 on the commercial auto industry yet, but we do believe that the key trends impacting the market prior to the pandemic are likely to reemerge as the economy reopens.
Frequency of severe losses is the largest contributing factor to the commercial auto market conditions. This is also happening in excess casualty where capacity reductions, increasing attachment points and tighter control over umbrella coverage terms are commonplace. Insurance carriers, in an effort to improve underwriting results and achieve sustainability, are willing to walk away if they can’t get the right price and structure. As a result, brokers are scrambling to help clients fill the capacity gaps created by these changes.
For clients with large commercial fleets trying to buy adequate auto insurance at a reasonable price, the current market is challenging at best. Yet by understanding what factors are contributing to the hard market, buyers can begin to build solutions to address those issues and help reduce their own insurance costs.
Factor #1: Distracted Driving
In 2018, 2,841 people were killed in the US due to distracted driving or drivers. Of the nearly 40,000 fatal accidents per year, 25% of them are the result of distracted driving.
What is distracting drivers? Eating, drinking coffee, changing radio stations or heat settings – anything that takes a driver’s attention of the road is a distraction. One of the larger contributors to distracted driving is cell phone use. An estimated 1.6 million vehicle accidents were caused by the use of cell phones while driving. According to a recent survey from National Institute of Occupational Safety & Health, 47% of commercial drivers surveyed admitted to reading text messages while driving. However, other distractions are equally dangerous – 34% of drivers say they have fallen asleep while driving. Those numbers could well be higher, too. A surprising 24% of surveyed drivers said they’d had a near-miss accident in the past week.
What buyers can do:
Educate yourself and your employees on how to reduce distracted driving. Prohibit cell phone use when drivers are behind the wheel and implement strong disciplinary measures and penalties to deter the behavior. Make sure your drivers know what the penalties are for noncompliance. Also, consider the use of telematics to monitor drivers’ behind-the-wheel behavior and employ coaching for drivers when behaviors don’t match policies and procedures.
Factor #2: Shortage of Qualified Commercial Drivers
In 2018, there were 60,800 unfilled jobs in commercial driving, an increase of 10,000 over 2017. By 2030, that number could swell to 160,000 open positions. With the average age of today’s trucker being 46, the shortage will continue to challenge the industry for what could be the next few decades. With fewer experienced drivers on the road and less experienced drivers filling the open positions, more accidents are bound to happen.
What buyers can do:
In a tight labor market, employers need to do all they can to appeal to job candidates. Have a modern fleet with collision avoidance technology and driver behavior technology such as in cab, forward and rear facing cameras. Establish a mentorship program to help train new hires. Plus, demonstrating that your company is leading with safety and employee wellbeing can help attract a wider pool of job seekers.
Factor #3: Increased Road Use – Pre COVID-19
There were more people on the roads up until the pandemic began. As the economy recovers, this is expected to resume. The estimated miles driven in 2019 totaled 3.225 trillion, up exponentially from the 12.2 billion miles driven in 2017. Increased travel leads to increased road density and increased risk of accidents.
What buyers can do:
As drivers are on the road more often, companies that employ them can implement stronger safety measures. Increase driver training frequency. Build and explicitly follow strong policies that prohibit long shifts behind the wheel. Adjust contracts with clients to assure drivers are not meeting unrealistic expectations. Install monitoring equipment in every vehicle, and actively address behavioral/ non-compliance issues as they arise.