Commercial Auto Rates Likely to Continue to Increase in 2019

The 2018 Q3 report from The Council of Insurance Agents & Brokers (CIAB) notes that commercial auto insurance premiums have seen the 29th consecutive quarter of rate increases. The average increase of 7.0 percent comes following an 8.2 percent increase in Q2. While it is the first quarter in the last year that the rate increase was less than the previous quarter, commercial auto increase have remained on average three to four times that of other lines of business.

Commercial auto policies are unlikely to lead to an underwriting profit and often take several years (if ever) to become profitable. Additionally, in the past ten years, two major carriers have left the market, reducing the competitive landscape for these policies. The Council’s President/CEO, Ken Crerar stated, “Due to distracted driving and more people on the roads, commercial auto claims have increased in both frequency and severity and it remains an industry-wide concern that The Council will continue to monitor in 2019.”

A recent article from Carrier Management identifies a number of trends leading to increased claims on commercial auto policies, and ultimately increased premiums.

  1. As a result of the improved economy, more vehicles are being produced and are on the roads. The higher volume of cars increases the likelihood for an accident.
  2. Trucking companies tend to hire more inexperienced drivers as a result of a tightened labor market.
  3. Technology enhancements in cars may help provide new safety features, but they also may create new risks. Cars are becoming more sophisticated with GPS, radio, auto-drive and the ability for your phone to connect to your car. These features are extremely helpful but may lead to drivers to become even more distracted.
  4. Claim severity is also impacting the premium costs. More and more bodily injury claims are being litigated. Also, settlement verdicts continue to grow.
  5. Third-party litigation funding, or litigation finance, is also contributing to claim severity. This is when the practice asks a third-party financier to provide money to an attorney to finance a suit. In exchange, the third-party is given some of the settlement. Typically, litigation funding is put into place to cover fees and costs in order to get a percentage of the recovery. Litigation funding can causes a five figure claim to become a seven figure claim.

All of these components have significantly impacted the rates for commercial auto. While the increases seem inevitable, there are steps you can take to try to ensure the best rates possible. Taking a risk management approach to your training programs, hiring requirements and safety procedures can help to control your claim activity. Combining that risk management approach with a broker that has strong, long-standing carrier relationships can help position your company, organization or institution for the best possible outcome.

To learn more, reach out to a trusted advisor to discuss your commercial auto coverage.