Technology Key to Containing Commercial Auto Insurance Costs

February 7, 2023

Mention Commercial Auto Insurance to anyone who runs a business — especially one that involves trucking — and you’re sure to elicit a groan. As Alera Group forecasts in our 2023 Property and Casualty Market Outlook, “The (insurance) industry struggles to overcome post-pandemic increased accident frequency and severity as commercial vehicles return to the highways.” 

Yet while accidents and inflation-related problems continue to plague insurers and insureds alike, most share a positive opinion of one insurance-related aspect of fleet management: the role telematics technology plays in mitigating driver risk.  

“It is considered the norm to implement a video-based telematics solution for monitoring and protecting large fleets and their drivers,” the insurance industry publication PropertyCasualty360 recently reported. “But now, this tool is increasingly becoming popular for smaller fleets with under 20 vehicles – the majority of the market. It follows that the power of video telematics is now a larger topic of discussion in the property and casualty insurance market.” 

For insurance brokers, getting fleet operators to adopt telematics is easy; most contracts — including insurance-carrier policies – require use of the technology. And, fortunately, most clients embrace it. Telematics help them filter out bad drivers and drive down fuel costs, simultaneously managing risk and reducing operating expenses, so what’s not to like? 

Market Conditions and Outlook Entering 2023 

Unfortunately, the positive role technology plays in driver safety represents the bulk of the good news regarding Commercial Auto Insurance. Here’s Alera Group’s forecast in the P&C Market Outlook: 

  • Pricing will remain stressed through 2023. While businesses with excellent risk management, loss history, maintenance programs and good driver selection will benefit most, they will still experience single-digit price increases reflecting record inflation. Those not meeting the highest standards will face increases of 15%-25%.  

  • Availability through standard markets, while adequate, will depend upon a risk-by-risk evaluation. Underwriters are determined to continue the decade-long effort to bring this line to profitability as they face increases in loss frequency and severity, and the effects of social inflation and higher repair costs.  

  • Although markets and capacity remain available, not all offer sufficient limits. While standard markets will offer primary limits of $1 million, higher limits will likely require layering from multiple carriers since few are willing to offer more than $2 million for excess limits.  

  • Underwriting scrutiny remains tough. Driver fatigue, limited availability of experienced drivers and increased miles on the road are issues of underwriting concern. Companies will more carefully assess driving records, driver accountability policies and DOT ISS scores (ratios of violations to miles driven, accidents, etc.). Fully completed applications and supplemental questionnaires will be common requirements.  

  • The underwriting process will require considerably longer lead time. Underwriters are looking for Commercial Auto accounts deemed “best in class,” and those not in this category can expect a time-consuming underwriting process. When ISS scores exceed 50, carriers may require up to six months to determine their willingness to accept the risk.” 

Solutions Amid Tough Times for Truckers 

One segment of the Commercial Auto market is particularly hard-hit. In a recent interview with Insurance Business America, Donato Monaco, president of Travelers’ commercial trucking division, Northland Insurance, explains the main reasons why “U.S. trucking continues to bear the load of rising (insurance) costs.” Monaco cites:  

  • Rising truck and repair costs, which were spurred by “COVID-related supply chain shortages and strong demand” and exacerbated by inflation’s impact on the price of trucks, parts and labor; 

  • “Significant challenges created by large jury awards, which have been increasing in both dollar amounts and frequency.” 

Monaco goes on to discuss how the insurance industry helps mitigate commercial trucking challenges, including the use of driver safety technology such as automated — or “advanced,” depending on which manufacturer or insurer is using the term — driver assistance systems (ADAS). 

While the use of telematics is mandated throughout much of the trucking industry, the proven effectiveness of the technology is making it an increasingly popular option for personal insurance consumers. With many carriers offering discounts for the use of connected devices that allow monitoring of driver behaviors, the use of auto telematics was up 33% in the first quarter of 2022, the consumer research company TransUnion reported

One company that offers artificial-intelligence (AI) software for driver safety, Nauto, touts its ability to help businesses save on Commercial Auto Insurance by creating customized risk assessments based on customer data.  

“Insurance companies love this because we can take drivers and dramatically change their risk behavior,” Nauto’s CEO, Stefan Heck, recently told the online publication Transport Topics for an article titled “Carriers Hoping to See Relief After Years of Insurance Premium Increases.” “We typically see a 60% reduction in risk behavior.”  

What More You Can Do 

Work with your agent or broker to implement a rigorous loss-control program, document your results and make a convincing case to your underwriter during the policy renewal process. A knowledgeable, experienced insurance professional will partner with you not only to make sure you have the right coverage at the right price but also to ensure you capitalize on the services available to you through your insurance carrier. 

And for a deeper understanding of how market forces are affecting different lines of insurance coverage for various industries, read Alera Group’s 2023 Property and Casualty Market Outlook. You’ll learn more about Commercial Auto Insurance as well as other lines that affect your business and your bottom line. To obtain the report, click on the link below. 


About the Author 

Brenton Kidd, CIC 

Managing Partner 

West Texas Insurance Exchange, an Alera Group Company 

Brenton Kidd specializes in commercial insurance solutions, with a focus on businesses in and related to the oil and gas industry. Licensed to sell property and casualty insurance, he achieved Certified Insurance Counselor (CIC) designation through the National Alliance for Insurance Education and Research. 

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