The rumors are true. With rates increasing across the board, commercial auto is just the next domino to fall in the line.
In today’s day-in-age no matter how often or not you are filing claims, hiring drivers with good records or the miles you are putting on the vehicles – the rates keep creeping up and up.
We understand that, it is not you. Instilling safety precautions does reward you and your staff. Although the insurance companies and brokers seem evil for these rates – it’s not us either. However, we do have the insight for you as to why your rates just won’t stay down.
The Factors of Rising Commercial Auto Rates
Distracted Drivers
In the world of the 21st century there are an exponential amount of distractions between the new gadgets installed in our motor vehicles, things going on outside of the car such as an accident or someone being pulled over and the most popular one, the cell phone.
According to the National Highway Traffic Safety Administration, around 3,500 Americans are killed each year in accidents pertaining to distracted drivers and around 12% or 400 of those are a direct result from texting and driving. Other causes of distracted driving accidents include: using the navigation system, adjusting the radio/ changing playlists on your phone, eating, drinking, reading and anything that is not paying full attention to the road ahead.
Although a distracted driver may not be involved in an accident, they could be the cause. If a driver is on their phone and blows through a red light causing cars to halt or swerve they risk getting into an accident to avoid hitting the distracted driver.
Repair Costs
Automobiles have been leveling up their technology year after year. The difference between cars and trucks produced 20, 10, even 5 years ago is drastic…and advancements are not slowing down anytime soon. With these technological advances comes higher prices for vehicles; along with more risk – more risk of a higher repair bill.
According to Deloitte, electronics hold some responsibility for the rising percentage of a new car’s total cost. Back in 2010 the percentage of a new car’s total cost that was attributed to it’s electronic features was 27%. That percentage was up to 40% in 2020…a 13% increase over 10 years.
With vehicles now coming with multiple sensors for collision avoidance/ warning, automatic breaking, back-up cameras and parking assistance aside from just the camera – you cannot expect the repairs to cost what they once did before all of these features. The benefit is a lot of these applications cohesively work together to create a more seamless, safe driving experience. On the flip side of things, there no longer is just replacing one part. With the electronics all being connected – you will more likely have more than one part to be replaced. More parts that are damaged and needing replacement, the more the cost will be to do so.
Medical Costs
There is a direct correlation between health and medical costs to policies like commercial auto. When someone gets hurt in a car accident whether they hit their head and need an x-ray or CT scan or another trauma occurs, a claim is filed and the insurance goes up. With rates already being so high, they will only increase.
The medical costs covered by insurance will be higher, as well as the cost, if any you have to pay out of pocket.
There is also the chance that when someone is hurt in an accident, they will need care following – not just at the hospital, but at places like out-patient treatment centers, physical therapy practices and even more doctor’s appointments to check in.
Driver Shortages
With the next generation of people entering the workforce, commercial trucking is low on the totem pole for roles being fulfilled. According to the American Trucking Association it is estimated that in 2022, the field was 78,000 drivers short. Decreasing just 2,000 drivers from the previous record-setting year in 2021, 80,000 drivers short of what they needed in the industry.
With this shortage comes for a need of people instead of the need for safe and experienced drivers. This is leading to more commercial drivers getting int preventable accidents and more tickets. Both contributing to the rates going up for insurance.
Social Inflation
We are all aware of the rising rates due to inflation. The median gas price according to the U.S. Energy Information Administration in 2020 was $2.25975. Just two years later, according to that same chart the median gas price in 2022 was $4.06383. We see the affects of social inflation everyday and they are constantly changing. So, just as all other avenues like gas, produce, clothing, meat have all gone up insurance companies have to keep up with raising their rates as well.
When it comes to lawsuit payouts in cases with truck drivers, the settlement money awarded has skyrocketed over the last 10+ years. A report from the American Transportation Research Institution states that from the years 2010 to 2018, the median verdict for crashes involving trucks took a 1,000% increase. Jumping from a $2.3 million settlement to a $22.3 million settlement.
These numbers are jarring and in this economy it is especially important that you work with an insurance brokerage that has the knowledge of the ever-changing market, the relationships with carriers to shop you around to find the best price for the best coverage for you and will be accessible when an issue arises. Give us a call today at 877-288-7169 to discuss how we can protect you and your business, or if you are looking for a second set of eyes – we are here for you!
