Factors Increasing Commercial Auto Insurance Rates

Dec 22, 2023 | Business Insurance

More Drivers – There are more drivers on the road than ever before. The greater the number of drivers, the greater the possibility of an accident. Trends in Litigation – Auto liability claims have risen steadily over the years. However, this means that the number of lawsuits filed as a result of car accidents has increased.

Commercial Auto Insurance is now essential for any company, organization, or ministry that owns and operates vehicles. Even when their drivers are safe and have a clean loss record, it is not uncommon for organizations to see annual rate increases. When it comes to your rates, claims history is only one piece of the puzzle. There are high-level trends that influence national rates.

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Here are a few possible reasons for your rates to rise:

Distracted Driving Incidents – As the number of accidents involving cell phones and other electronics increases, so do commercial auto insurance rates.

Accident expenses include the cost of medical care as well as the cost of repairing vehicle damage. The cost of commercial auto insurance rises in tandem with these costs.

Driver shortages – Many experienced driver jobs are unfilled, forcing organizations to hire less experienced drivers. Less experience often leads to more mishaps. This causes commercial auto rates to rise.

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More Drivers – There are more drivers on the road than ever before. The greater the number of drivers, the greater the possibility of an accident.

Trends in Litigation – Auto liability claims have steadily increased over the years. This means that the number of lawsuits filed as a result of car accidents has increased. This results in higher legal fees and a more serious claim if bodily injury is involved.

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Incidents of Distracted Driving

While a variety of factors can contribute to a collision (for example, impaired driving, poor road conditions, and inclement weather), distracted driving is one of the most common causes of accidents. As these incidents became more common, insurance rates rose in lockstep, posing a risk management challenge for insureds and a profitability challenge for insurance carriers selling commercial auto insurance.

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According to the National Highway Traffic Safety Administration, up to 391,000 people are injured and 3,450 people are killed in distracted driving crashes each year. Distracted driving impairs awareness, decision-making, and performance, increasing the risk of driver error, near-collisions, and crashes.

Distracted driving is an ongoing safety concern for organizations that use vehicles in their operations—a concern that continues to impact the cost of coverage for businesses nationwide.

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Rising Vehicle Repair Prices

Vehicles have become safer and more efficient as technology has advanced. However, as commercial vehicles become more sophisticated (for example, with backup cameras and blind-spot cameras), they become more expensive to repair.

According to AAA, vehicles with driver assistance systems often cost twice as much to repair as those without. As a result, the losses associated with a collision are much greater, resulting in rate increases and numerous challenges for insurers.

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Driver Scarcity

Approximately 160,000 commercial driver positions will go unfilled over the next decade, according to the American Trucking Associations. This ongoing shortage has put a significant strain on businesses, forcing them to hire less experienced drivers.

This not only increases the likelihood of accidents and subsequent claims, but it also makes businesses more expensive to insure. With no end in sight to the driver shortage, businesses will need to effectively train drivers and ensure that road safety is a priority.

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The Reason for Rising Commercial Auto Insurance Rates

Commercial auto insurance rates have been rising steadily since 2011, often by more than 10% per year, as the cost of accidents and claims has risen.

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According to a recent Risk Placement Services study, the trucking industry has been the hardest hit by the steep increases, and there are a number of factors contributing to the rate hikes. One of the most significant factors is that insurers have struggled to keep up with rising accidents and claims costs, leaving them in the red for the majority of the last decade.

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According to the study, large court verdicts, higher maintenance costs, lower freight demand, and poor infrastructure, combined with an aging workforce and a driver shortage, have all resulted in higher insurance rates. Here’s what’s at stake:

Good drivers are aging and becoming scarce; half of all long-haul truck drivers are over the age of 46. The minimum age to obtain an interstate commercial driver’s license is 21, and many insurers prefer drivers who are at least 24 years old.

The industry, as it scrambles to hire more drivers, many of whom are in their twenties, has to deal with the increased likelihood of accidents due to the inexperience of these new drivers.

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Distracted driving — Truck drivers and those they share the road with are increasingly looking at their phones, eating, looking at their navigation systems, and taking their eyes off the road. This increases the likelihood of an accident occurring.

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Crumbling infrastructure — America’s crumbling roads and bridges are putting more strain on the trucks that travel on them, increasing the likelihood of an accident.

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Expensive cargo — The contents of the trucks also necessitate larger amounts of insurance at higher rates. Shipments of electronics and medicine, for example, are a magnet for thieves. If a flatbed trailer transporting expensive machinery flips over, the cargo is likely to suffer damage beyond repair, requiring the insurer to pay for its replacement.

Because of these high costs, some businesses are choosing not to purchase critical coverages such as excess liability (which can protect against those $10 million lawsuits) and cyber insurance. Modern vehicles are becoming more automated, making them vulnerable to cybercriminals.

According to the Risk Placement Services report, businesses with larger vehicle fleets, someone responsible for safety, quality drivers, and regular maintenance will find insurance more affordable and readily available.

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