Property & Casualty Insights
Combat the Rising Costs of Auto Liability With Comprehensive Fleet Safety
APRIL 5, 2022
More frequent and severe losses continue to increase the cost of premium for commercial auto liability insurance, regardless of industry, location and fleet size. An analysis of the operational costs of trucking found that premiums reached a new all-time high in 2020 of 8.7 cents per mile.1 Insurers have also increased deductibles and lowered excess coverage limits, creating more exposure to liability and driving up the total cost of risk for many insureds.
Underlying Sources of Loss
While taking on more risk — typically in the form of higher deductibles or self-insured retention (SIR) — is a common practice to combat rising premium costs, it fails to address other underlying sources of loss that contribute to higher overall costs of risk:
Litigation — Claims litigation is a significant exposure, often from excessive or “nuclear” verdicts with judgements in the millions of dollars. Plaintiff’s attorneys have been successful in pointing to technicalities and poor documentation to establish negligence and liability on part of the motor carrier or fleet operator.
For example, attorneys have been effective at interpreting the failure to adopt widely available safety technology, such as a telematics system, as a motor carrier’s negligence. Drivers can also be a deciding factor in nuclear verdicts: one report found that almost all cases where driver history, substance or alcohol use, and health issues are cited resulted in favorable plaintiff verdicts.
Regulatory Assessments — Designed to hold drivers and motor carriers accountable to safety, and enforced by the Federal Motor Carrier Safety Administration (FMSCA), high Compliance, Safety, Accountability (“CSA”) and Behavioral Analysis and Safety Improvement Categories (“BASIC”) scores indicate a poor safety record, and result in more frequent FMSCA inspections and difficulty placing insurance. The additional scrutiny makes it especially challenging for motor carriers to make material improvements to safety scores and, in many cases, remain operational.
Driver Injuries — According to data from the National Council on Compensation Insurance, the most costly lost-time workers’ compensation claims by cause of injury result from motor vehicle accidents (MVAs), often due to the serious nature of injuries sustained in a crash.2 Averaging $81,971 per claim, MVA claims cost 80% to 100% more than the average workers’ compensation claim, not including the additional costs of driver and vehicle downtime.3
Organizations that rely heavily on commercial vehicles or drivers to remain profitable can take proactive steps to address these and other sources of loss, and improve the safety and sustainability of their operations, by establishing a comprehensive fleet safety program.
Combat Rising Costs With a Fleet Safety Program
Fleet safety is not just critical for large motor carrier operations. Any organization that has employees driving on company business should develop a fleet safety program focused on preventing vehicle accidents and minimizing loss when accidents occur.
A well-designed fleet safety program can help lower an organization’s overall total cost of risk by:
- Reducing auto liability losses, resulting in lower insurance premium and better coverage
- Reducing employee injuries and vehicle downtime
- Increasing efficiency in operations from recruiting and training new hires, improving employee morale and maintaining an optimized fleet
How USI Can Help
USI Insurance Services’ risk control consultants work with clients to assess exposures to risk and provide prioritized recommendations to improve fleet safety, prevent vehicle accidents and reduce overall loss. USI’s risk control consultants recently assisted a manufacturer with a large fleet of commercial vehicles develop a fleet safety plan to help reduce the frequency and severity of auto claims. We made several recommendations, including installing a telematics system in all vehicles.
As a result, the client was able to reduce aggressive driving by half, exceeding the speed limit by 89% and high-speed travel (over 70 mph) by nearly 100%. The reduction in unsafe driving behaviors helped the client reduce accident frequency by 52% and cut claims costs by 61% in the first year after implementation, resulting in premiums 10% below industry average.
Reduce the frequency and severity of accidents and claims, and mitigate associated costs from workplace injuries, litigation and regulatory assessment. Contact your USI representative or email pcinquiries@usi.com to learn more about our fleet safety and other solutions designed to lower your organization’s total cost of risk.
1 American Transportation Research Institute, An Analysis of the Operational Costs of Trucking: 2021 Update
2 National Safety Council, Workers’ Compensation Costs
3 National Council on Compensation Insurance (NCCI), Motor Vehicle Accidents in Workers Compensation, 2018
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