For the past several years, fleets have been feeling the financial squeeze. According to the Insurance Information Institute, insurance companies are experiencing their most significant rate increases in almost 13 years. While this trend stretches across every part of the industry, the effects of steeper costs can be seen more prominently in the commercial auto market.
In assessing this situation, insurers across the country have found several interesting causes for these rising costs. By determining these causes, commercial fleets can develop ways to preemptively protect themselves and their businesses.
- What’s Behind the Rising Costs? – The first cause is related to the economy – but not in the way you might think. Rates were favorable for commercial fleets during the recession, as fewer people were on the road, thanks to high gas prices, lack of work travel and other related deterrents.
Things shifted once the economy improved in 2011. Oil prices dropped. The recession subsided. People could afford to drive again, so more cars clogged up the roadways.
Municipalities re-constructed roads with bike lanes, and that created added hazards. New and otherwise inexperienced drivers entered this crowded landscape. At the same time, distracted driving became a widespread problem. More frequent car accidents were the natural consequence.
Commercial fleets have found these same trends of inexperienced and distracted driving among their fleets.
Once the economy improved, new groups of drivers began to work for commercial fleets: young adults with little to no road experience and retired baby boomers with little to no experience operating commercial trucks. This lack of experience was especially concerning for the commercial fleets of small distributors, whose new drivers had difficulty managing their clients’ small neighborhoods.
While accident rates have remained stubbornly high in the U.S. within the past decade, insurance costs have risen in response to the increased severity of these accidents.
Another factor in the steep incline of commercial insurance costs is the rising cost of car accidents. As commercial fleets are liable for the accidents caused by their drivers, they are often blindsided by the high expense of medical bills and vehicle repair costs.
Repair costs are especially difficult to estimate these days due to advanced vehicle technologies – from new cameras to safety sensors. Cars often need a total recalibration after a crash, and commercial fleets shoulder all these costs.
- How to Improve Safety
These various factors have contributed to a perfect and expensive storm for commercial fleets and their insurers. In the last few years, insurance rates have been inadequate to cover the unexpectedly high losses incurred by frequent accidents and their associated costs. Commercial auto insurers across the country have been forced to adjust their rates in order to compensate, which has left insurers and fleets alike struggling to adjust to new pricing.
There are numerous ways commercial fleets can protect their businesses from this chain of problems. It all begins with a strong commitment to safety from top management.
While it can be tempting to skip the screening process, it’s critical to check driving records before making any hiring decisions. Ongoing training and a reward system for accident-free driving records are also important.
A solid fleet safety program should include:
- A safety committee that discusses accidents and lessons learned.
- A vehicle maintenance program that prevents out-of-service violations.
- Pre-trip inspections to ensure a secure and balanced load.
- Regular driver introductions to new or changing routes.
- A performance program with predetermined consequences for violations.
- Clear instructions in the event of an accident.
- An annual Driver Motor Vehicle Records check, at a minimum.
- A written fleet safety manual.
Additionally, an investment in new technology can greatly benefit fleet safety. For example, through vehicle telematics data, managers can analyze the habits of their best performing drivers, as well as isolate the habits that frequently cause accidents among their fleet.
Dash cams may be effective learning tools for managers as well, as they are a visual guide to the road conditions fleet drivers experience and show how well drivers are handling these challenges. This innovative technical data can help commercial fleets create a stronger fleet of drivers through improved driver selection and more comprehensive fleet training.
Tools
For insurers, this technical information can also help them determine the risks and benefits of insuring a fleet. This assurance of good risk, backed by extensive data and supported by fleet training and education, may help commercial fleets receive the best insurance pricing available, based on the safety of their fleet.
Any tool that helps commercial fleets manage their insurance costs is an invaluable, and literally life-saving, asset.
Technology is an important aspect of an exceptional fleet program. However, an active management team that builds a culture that emphasizes employee and company safety and well-being, trumps all.
Eileen Currie is senior vice president of commercial lines for the Arbella Insurance Group (www.arbella.com). It is a customer-focused regional property and casualty insurance company, providing personal and business insurance.
