For less than 1% of the cost of your annual commercial auto insurance, you can have fewer accidents and pave the way towards more affordable fleet insurance.
With the future of commercial auto insurance becoming more challenging every day, corporate risk managers are needing to make tough decisions about risk coverage. As a result, many companies are being forced to take on more risk as fleet insurance costs continue to rise.
Long term, the solution always comes back to the need to have fewer accidents and claims. While the adoption of fleet safety technology has increased tremendously, this has not helped stem the rising tide of claims.
Key Takeaways
- Commercial auto insurance is getting more expensive and will continue to do so.
- Despite the adoption of safety technology, accidents and associated claims costs continue to rise.
- Commercial auto insurers continue to struggle with an unprofitable book.
- Recent studies provide a clearer picture of accident causation.
- Focusing on managing the risk of cell phone use will address the leading cause of accidents while costing a small fraction of overall commercial insurance costs.
What is the cost of commercial auto insurance?
Commercial auto insurers have not been profitable in writing commercial auto coverage since 2010-2011. Given the rising claims trend every year, insurers have tried to get back to profitability by consistently raising premiums. Unfortunately for these insurers, claims keep outpacing premium increases, with some insurers no longer writing this coverage at all. According to a recent report from AM Best, commercial auto underwriters saw more than $22 billion in underwriting losses between 2011 and 2020, despite underwriters increasing premium pricing for 41 consecutive quarters.
According to this 2021 article, commercial auto insurance premiums have skyrocketed to around $2,000 to $15,000 annually per vehicle, depending on the category of commercial vehicle (see table below). It’s fair to say that these premiums have continued to increase since 2021 by 5% annually across the board.
| Commercial Vehicle Category | Annual Premium per Vehicle |
|---|---|
| Standard car used for business purposes | $600 to $2,400 |
| Limousine | $4,000 to $10,000 |
| Cargo or deliver van | $3,300 to $6,200 |
| Taxi | $5,000 to $10,000 |
| Semi-truck | $8,000 to $12,500 |
| Paratransit | $10,000 to $15,000 |
New studies have revealed that mobile device distraction is the #1 cause of auto incidents, with 57% of all crashes involving some form of mobile distraction during the drive. Even more dramatic is the fact that 34% of all incidents show cell phone interaction within one minute of the accident. Talk about a smoking gun!
Managing the future pain of fleet insurance costs
Given that mobile distraction is a leading contributor to accidents and claims, improvement is the key to achieving low cost commercial auto insurance. It stands to reason that corporate safety and risk managers should focus on reducing employee mobile distraction behind the wheel. Viewing solutions to cell phone distraction — technology or otherwise — as a “supplemental insurance policy” will absolutely result in fewer claims in the future. This small investment in managing mobile device distraction will pay huge dividends in future insurance costs and insurability.
The reality is that today’s commercial fleet has mounting costs of insurance eating away at profitability. Without a more proactive approach to having fewer accidents, fleets will continue to be at the mercy of market dynamics.
The ultimate answer for how to lower commercial auto insurance
Ultimately, the only real relief is going to be achieved by insurers’ ability to achieve profitability. Simply trying to price their way to profitability is a painful path for everybody. Insurers aren’t going to pay out more than they collect long term. Ultimately all you can do is take your safety record — your actual history of losses — to your insurer and they will pass judgment on your level of insured risk.
The best path for improved insurability is to have a strong safety program with improving safety results. Getting control of the #1 cause of crashes with a low cost fleet safety program will yield many benefits for your company. Not only will you receive the immediate benefit of fewer claims today, but your claims history will drastically improve which enables your company to explore the best possible insurance options in the future.
Here are some tips on how to lower fleet insurance premiums:
- Examine your loss control practices relative to your fleet and drivers. Enhance your driver safety programs by implementing or modifying safe driving and distracted driving policies.
- Ensure you hire qualified drivers by using motor vehicle records (MVRs) to vet drivers’ experience and moving violations. Disqualify drivers with an unacceptable driving record. Review drivers’ MVRs regularly.
- Consider technology solutions to strengthen loss control measures.
Regarding technology solutions, the cost of managing the most impactful problem of device distraction is trivial compared to continuing to experience the inevitability of claims resulting from mobile device distraction. For less than 1% of the annual premium of your current vehicle insurance coverage, you can provide immediate in-cab proactive safety to your drivers and the foundation for surviving a future of escalating insurance costs.
