Maximizing Savings Amidst Challenges In Commercial Auto Insurance 
We are sure you have noticed that the commercial auto insurance landscape is undergoing a seismic shift, bringing a surge in costs that is delivering a significant blow to businesses. According to a report by the American Association of Insurance Services (AAIS), commercial auto insurance rates have soared by an average of 8.5% in the past year alone, presenting formidable challenges for businesses striving to manage their expenses. This upward trend is a result of a perfect storm of factors, including increased claims frequency and severity and rising operational costs for insurers. Understanding the reasons for the shift in the commercial auto market is helpful in guiding you toward strategies to mitigate your costs and safeguard your bottom line.
The Main Causes of the Shift in Commercial Auto Insurance:
The Roads Are Becoming More Dangerous:
The roads have indeed become more perilous. Data from the National Highway Traffic Safety Administration (NHTSA) reveals a shift in driving patterns following the COVID-19 public health emergency declaration in 2020. This shift has led to an increase in reckless behavior among some drivers, including speeding, driving under the influence, and neglecting seat belt usage. Consequently, crash severity has spiked, with research from the National Safety Council (NSC) indicating a 22% rise in the death rate for motorists compared to pre-pandemic levels. Fatal crashes involving factors like lack of seat belt usage, alcohol, and speed have also seen alarming increases.
Increased Vehicle Repair Costs:
Repairing vehicle damage has become increasingly costly, with several factors contributing to this trend. Insights from the Automotive Body Parts Association (ABPA) suggest that auto repair shops are experiencing significant backlogs, with nearly all reporting scheduling delays of at least two weeks. Issues with parts availability and labor shortages are driving these delays. However, the complexity of repairing newer vehicles equipped with sophisticated technology is a major factor. Sensors and other advanced features often require recalibration or replacement even after minor collisions, significantly driving up repair costs.
Auto Claims Are On The Rise:
The Insurance Research Council (IRC) reports a staggering 72% increase in auto claims severity since 2013, far outpacing the 27% rise in the Consumer Price Index over the same period. This surge in claims severity is attributed to various factors, including the rise in reckless driving and escalating repair costs. Social inflation, characterized by rising litigation costs, is another significant contributor, adding billions in commercial auto liability claims costs between 2012 and 2021, according to data from the Insurance Information Institute (III).
What Can Businesses Do?
While some factors contributing to rising commercial auto costs may be beyond businesses' control, there are proactive steps they can take to promote safety and reduce liability within their organizations. Prioritizing safe driving practices, investing in advanced safety technology, and partnering with experienced insurance brokers like Bone, Robertson, & McBride, Inc. can provide access to tailored insurance and risk management solutions designed to address the unique needs of businesses. Together, these efforts can help businesses navigate the challenges of the evolving commercial auto insurance landscape with greater confidence and financial resilience.
For more information, please contact Aimee Padden at 925 674-1000 ext. 107 or Aimee@brmins.com.