How you can help your clients keep their commercial auto insurance premiums low
Once your clients understand how rates are calculated, then they can begin to take steps to lower their commercial auto insurance premiums. Share these facts with them: The top two factors affecting rates are claims history and the driving records of their various drivers. Digging a little deeper, those can be broken down into vehicle type, deductible, the frequency and severity of their crashes, vehicle repair costs, medical costs, lawsuits and court judgments. Some of these they have direct control over such as the vehicles, drivers and deductibles chosen; some they can only influence.
Let’s start with the obvious ones.
How vehicle type and use affect commercial auto insurance rates
Whether your commercial client has just one vehicle for regular use by employees or employs a fleet of delivery vans or trucks – the make and style of their vehicles impacts rates, just as it does for their personal auto insurance. Don’t spend more on vehicles than necessary. Expensive vehicles mean higher premiums.
When assessing a fleet, underwriters consider the vehicles’ ages, their preventive maintenance program and repair costs. If your client is a motor carrier, underwriters may also review Federal Motor Carrier Safety Administration (FMCSA) information on the fleet—including SAFER (Safety and Fitness Electronic Records) and CSA results—and other publicly available information.
As CoverHound explains, “Carriers use the classification and function of commercial vehicles to help assess risk and premiums…. For instance, trucks, tractors, and trailers that weigh more have more potential to do serious damage in an accident, and may have a harder time when navigating city streets.”
How the vehicles are used will also affect rates. In addition to whether a vehicle is part of a fleet or not, the Insurance Services Office (ISO) has three use classifications that affect premium calculations:
- Service use: transporting people, tools, equipment and materials to worksites
- Retail use: making deliveries to, or pick ups from, residences
- Commercial use: a catchall for other uses besides service and retail, when transporting property
ISO also breaks down different states and regions into rating territories. Where those vehicles travel ultimately affects how much risk your client presents to carriers. For instance, if the vehicles remain within a rural area versus driving in a busy urban setting at rush hour, all other factors being equal, they should see lower commercial auto insurance rates.
How driver choices and consistent training can help lower commercial auto insurance premiums
Improving their drivers’ performance can help your clients lower their commercial auto insurance rates: A recent study by the U.S. Department of Transportation shows that 90 percent of all crashes are due to driver action, attitude and behavior. Ongoing driver training keeps safety at the forefront for their drivers, ultimately affecting both frequency and severity of accidents and thereby lowering premiums. Some steps to take include the following:
Select good drivers.
Urge your clients to conduct background checks prior to hiring, even if the job description only calls for occasional time behind the wheel. They can typically order an MVR online from their state DMV. Choose people with 1 point or less on their licenses.
In addition to traffic violations, when they request a driving record report for potential employees, they will see whether he or she has a valid driver’s license, what their license restrictions and endorsements are, and whether their license has been suspended or revoked.
Before your client hires employees who will drive regularly or sporadically, they need to ascertain whether the new hires will respect the company’s rules and regulations and follow instructions. It probably goes without saying, but don’t hire anyone who’s been charged with driving under the influence, reckless driving, aggressive driving or distracted driving. Whether or not they actually cause an accident while on the job, just having them listed as a driver is likely to increase your client’s premiums. Why? Drivers with traffic convictions are more likely to cause an accident. And if their employee causes an accident, serious financial and legal issues can result. The number of negligent hiring lawsuits has greatly increased over the past several years.
Train them consistently.
Your commercial clients should provide driver safety training on a regular basis. Start the training when the new person is onboarded and periodically thereafter, ensuring that both new and seasoned employees are properly prepared. Be sure to include steps to take when they’re involved in an accident, and provide that information on a small card to carry with them, emphasizing the importance of reporting the loss immediately to their supervisor or designated person. Your insureds need to make it clear from the outset that they’ll be checking their records periodically – and then do it.
Particularly if the employee’s job is full-time or nearly full-time driving, it’s advisable to monitor drivers to ensure their best performance.
Your insureds may want to add GPS tracking to their vehicles which will enable them not just to track vehicles’ whereabouts and control malingering, but also monitor for speeding.
As you probably know from experience, drivers don’t always self-report their tickets, accidents and DUI issues, so suggest that your clients use a monitoring service, such as SAMBA driver record monitoring, Driver’s Alert or Driving Dynamics, to automate their drivers’ monitoring program. These services routinely check for new violations, DUI or DWI convictions, license suspensions, revocations, and approaching license renewal dates. Your clients get a report each month and can take action, if necessary.
For motor carriers or other distance trucks, using fleet management and safety technology such as telematics systems or services, in-cab and exterior cameras, systems that track real-time data and driver behavior, and rear-view cameras and sensing equipment all can help lower commercial auto insurance premiums. Multiple studies have shown that telematics and other recent technologies reduce collision frequency and severity. Monitoring drivers improves compliance with speed limits and reducing hard-acceleration and hard-braking events, also saving fuel. The ability to track routes and chart more efficient ones, thereby lowering miles driven, contributes to lower claims and also reduces fuel and maintenance costs.
Those are the sticks; now here’s the carrot approach that your clients can deploy: Reward drivers for a certain number of miles of incident-free driving, or bonus all drivers with a share in premium savings if their safe records help your clients save money.
Other tips to lower commercial auto insurance rates
Know their loss experience
Remind your clients that they need to keep tabs on their loss experience, which affects their experience modification factors (“experience mods”), which in turn impact premiums. It may also affect their ability to find competitive coverage at all. Remind them to work with their claims adjuster to ensure all claims are dealt with as speedily as possible.
Raise their deductible
Provide your clients with several deductible options to determine the trade-offs between first-dollar coverage versus paying a higher deductible when a claim occurs, to help lower them commercial auto insurance rates.
They may find it best to raise their deductible above $2,500. This will keep fender-benders off the records. They can then take the savings from raising their deductible and bank them to pay the minor incidents, or buy more liability or umbrella coverage.
Consider dropping collision
Help them perform a cost-benefit analysis to determine whether they need collision coverage. If they have an aging fleet, or if they can afford to replace the occasional vehicle, think about cancelling collision. Those funds may be better spent increasing their liability limits.
Better driving records also impact workers’ compensation premiums
Does your client need another incentive to keep training their drivers? According to National Council on Compensation Insurance (NCCI) data, the highest-cost lost-time workers’ compensation injury claims result from motor vehicle crashes. Continual training and thereby reducing collisions can also positively impact workers’ compensation rates.