How to Combat a Challenging Auto Insurance Market With Targeted Risk Control

JULY 2, 2024

The combined ratio for commercial automobile liability worsened in 2023, increasing to 113% — its highest level since 2019.1 As we point out in our 2024 Commercial P&C Market Outlook: Mid-Year Addendum, this indicates billions of dollars in losses for auto insurance carriers, which can prompt them to increase premiums, create strict underwriting standards, and reduce coverage options.

Several factors have contributed to this challenging market, including nuclear verdict concerns, inflation issues, driver shortages and distracted driving. Considering these challenges, most insureds — regardless of industry or vehicle class — should anticipate ongoing premium increases in 2024. Policyholders with sizeable fleets or poor loss history may encounter double-digit rate increases, reduced capacity, and potential coverage restrictions.

Organizations can combat this costly trend with targeted risk control. A knowledgeable broker can help develop targeted solutions to reduce claim frequency and severity, and lower overall claim costs by up to 30%.

Issues and Solutions for Insureds

The first step toward bending the claim curve in a favorable direction is to conduct a forensic review of your loss history to identify specific loss trends, such as unsafe backing. This detailed analysis enables risk control consultants to focus on key cost drivers and root causes when developing a targeted risk control plan to eliminate and mitigate these losses.

Some key issues and solutions include:

Issue: Nationwide’s 2024 survey of commercial drivers finds that distracted driving is a significant safety issue, with 34% admitting they sometimes or often feel distracted behind the wheel. The top causes are GPS/navigation systems (55%), responding to work messages (36%), texting/talking on mobile phones (27%), and checking social media apps (13%).

Solutions: Phone apps and dash cams. USI helps clients identify appropriate solutions to distracted driving. This may start with a safe driving phone app that can block access to phone alerts, disable other phone apps while driving, send incoming calls to voicemail, and provide speed alerts. A dash cam can help provide lane departure warnings, monitor driver fatigue, and offer many other features to reduce distracted driving.

Issue: The importance of defensibility in crash litigation is highlighted by the National Law Journal’s recent “Top 100 Verdicts” report, which discusses automotive judgments ranging from $30 million to $250 million. Such a substantial financial exposure for fleet operations is mainly due to continued large verdicts, disparity in state laws, and social inflation — the rising cost of insurance claims above and beyond the overall rate of inflation.

Solutions: Loss prevention and fleet safety assessments. USI clients can improve their defensibility in vehicle crash litigation by implementing robust loss prevention programs, which include driver safety training and establishing policies that encourage responsible driving behaviors. We can also perform fleet safety assessments to uncover potential risk areas, provide insights on regulatory compliance to ensure adherence to laws, and explore opportunities for improving incident response protocols. Our approach to conducting detailed loss analysis can further pinpoint specific trends or issues that contribute to accidents, which allows us to advise on targeted interventions. Additionally, by keeping detailed records and utilizing vehicle maintenance programs, we can help ensure that fleets operate safely and effectively — a key component of crash litigation defense.

Issue: Poor Department of Transportation (DOT) ratings can result in loss of operating privileges, challenges with securing affordable insurance, loss of customer contracts, and increased claim settlement costs.

Solutions: Investigations, corrective action, and safety management. An effective insurance broker can help evaluate on-site investigation reports to determine deficiencies and violations discovered; develop a corrective action strategy to improve compliance and reduce violations; and assist in preparing a safety management plan required to increase safety rating.

Issue: Companies employing or utilizing drivers as part of their business model need to develop driver qualification standards. Failure to implement appropriate controls can result in higher crash frequency, increased settlement values, and recruiting/retention constraints.

Solutions: Tailored policies and audits. USI helps clients develop driver qualification and hiring policies tailored to their specific needs and in compliance with DOT regulations. This includes creating custom-designed driver forms, providing current driver reports, and conducting audit reports to ensure all qualification files are accurate and complete. USI can recommend driver hiring practices that meet industry and legal standards, thereby helping to protect against potential liabilities.

Issue: When a DOT-regulated organization falls into the Behavior Analysis and Safety Improvement Category (BASIC), or is in alert status, the company may be experiencing operational disruption, increased crashes, higher insurance premiums, and/or decreased driver recruiting and retention efforts.

Solutions: Assessments and monitoring technologies (i.e., telematics). USI can help with the specific steps to manage this regulatory risk using detailed analyses, assessments, and surveys. In addition, we may advise on implementing telematics and other monitoring technologies to track driver behaviors that contribute to BASIC scores, like unsafe driving or hours of service (HOS) violations. By partnering with our clients, we aim to improve compliance, enhance safety, and ultimately help clients achieve better BASIC scores.

Issue: A fleet safety program plays an essential role in preventing vehicle accidents and employee injuries, as well as mitigating the financial impact of a hard insurance market. An effective program starts with a comprehensive risk analysis for root causes of fleet losses, potential exposures, and existing program shortfalls.

Solutions: Customized design, DOT compliance, and ongoing communication. USI works with our client’s unique operations and individual risk profiles to optimize the program, reduce costs, and broaden coverage, promoting safe and efficient fleet operation. Additionally, we align the plan with DOT regulations and best practice standards. Through our risk management services, including the USI Fleet Team Services audit reports, we keep clients informed about essential regulatory updates for maintaining an effective fleet safety program.

Contact your USI representative or email to learn more about fleet safety and other solutions designed to lower your organization’s total cost of risk.