6 Forces Driving Commercial Auto Insurance Costs
Over the past decade, auto insurance rates have increased steadily, well exceeding the rate of inflation over the same period. But what's driving this upward trend? Explore factors that have significantly impacted the rates for commercial auto.
1. Bodily injury loss costs
In the five-year period from 2018 to 2022, auto severity has increased a substantial 40% even as frequency has declined.1 Causes include an increase in deadly accidents, rising verdicts in legal cases and medical cost inflation. In fact, the latter is expected to grow 7% in 2024, up from 6.0% in 2023 and 5.5% in 2022.2
2. Rapid rise of litigation costs
With attorneys actively pursuing auto accident business, more claimants now have legal representation. These claims see higher rates of expenditures for medical procedures and treatment.3 A complete fleet management program can help reduce your exposure.
3. Distractions and impairment
Distractions behind the wheel, from vehicle infotainment systems and mobile devices to driving under the influence, can lead to significant risks: 30% of companies surveyed reported that they have employees who have been involved in crashes due to mobile phone distraction, and deaths due to preventable crashes are up 18% versus pre-pandemic levels.4
4. Inexperienced drivers
Resignations and retirements are leading to a shortage of commercial operators, increasing the chance that less experienced replacement drivers are behind the wheel. Operators in new vehicles and covering new routes can also contribute to an increase in accident rates.
5. Vehicle repair and replacement costs
Autos have become more expensive to insure and repair. Newer vehicles are outfitted with advanced materials and technology designed to make driving more comfortable and safer. When these vehicles are involved in an accident, costs can be high, and labor shortages and inflation have only exacerbated the issue. In fact, motor vehicle parts and equipment costs have increased almost 24% since September 2019.5 Meanwhile, used car prices are still up almost 47.9% in 2023 compared to the average from 2015 to 2019, despite recent softening.6 This directly impacts the cost of claims in the event of a total loss. Finally, rising auto thefts are further contributing to increased claim costs.
6. Increasing usage of third-party transportation carriers
The use of third-party carriers is on the rise, thanks to the explosion of global ecommerce shipping, supply chain complexity and cost optimization. However, businesses that rely on third-party carriers could face litigation if the motor carrier is involved in an auto accident and lacks adequate liability coverage. Additionally, increasing attorney involvement means plaintiffs and their legal counsel may seek higher damage amounts by alleging that the business was negligent in hiring the third-party transportation provider or was engaged in direct oversight to the drivers.
To learn more about auto insurance contact your agent or a Travelers representative.
Sources
1 https://risk.lexisnexis.com/insights-resources/white-paper/auto-insurance-trends-report
2 https://crashstats.nhtsa.dot.gov/Api/Public/ViewPublication/813582.pdf
3 https://www.travelers.com/travelers-institute/webinar-series/symposia-series/rise-of-litigation-costs
4 https://www.travelers.com/resources/risk-index/distracted-driving
5 https://vtechworks.lib.vt.edu/server/api/core/bitstreams/a5800006-4b00-4854-bd5c-1f3e76f5d5c1/content
6 https://rsmus.com/insights/industries/financial-services/rising-auto-repair-costs.html
7 https://www.insurancejournal.com/magazines/mag-features/2024/01/22/756165.htm
