How to combat rising commercial auto claims

How to combat rising commercial auto claims

Why commercial auto claims are rising, and how you can keep your claims costs lower

As a business owner, you may have noticed rising commercial auto claims. If so, you’re not alone. It’s a nationwide epidemic of sorts. And it’s causing commercial auto insurance rates to rise faster than they have in more than a decade. Even so, costs associated with crashes are outpacing premium increases for some insurance companies.

Yes, it’s true: Although insurance companies are charging more for auto liability, they are making less money. What’s causing the spike in accidents and rising commercial auto claims? Insurers report distracted driving from the use of smartphones, growing costs for medical care and auto repair and the rising prices of auto parts are all significant contributors to the increasing severity of claims.

While the frequency of workers’ compensation claims has continued a decades-long decline, the number of work injuries caused by motor vehicle accidents has continued a steady increase that began in 2011, according to a new report by the National Council on Compensation Insurance, as recently reported in Claims Journal. The article reported,

“The impact of the increased number of motor vehicle accidents on workers’ comp is amplified by the severity of those claims,” [NCCI Executive Director and Actuary Jim] Davis said. On average, motor-vehicle related claims cost 80 percent more than workers’ comp claims from all causes.”

What’s contributing to spiking commercial auto claims?

The National Safety Council estimated auto crashes cost about $445.6 billion in 2018, including those stemming from motor vehicle deaths, injuries and property damage. This figure is up nearly eight percent from 2015.

Granted, the latest cars are safer than older models. They include rear view cameras, collision-avoidance systems, air bags and anti-lock brakes. That means they should be keeping us safer – and they do, to a degree. While more accident injury victims are surviving major crashes, their injuries can be catastrophic. And that leads to larger medical costs.

Despite increased safety features in our vehicles and new cell phone laws, more drivers mean more chances for accidents. Mix in one more ingredient, evident especially this year and last: We’re seeing more adverse weather conditions (floods, fires, storms) wreaking havoc not only with structure, but also with vehicles.

Work-related motor vehicle crashes cost employers $56.7 billion, according to a report by Motus, a vehicle management platform that offers employers ways to limit the costs of accidents. They estimate that about 40 percent of vehicle accidents are work-related, while 53 percent of vehicle crash injuries cause employees to miss work. “Between medical expenses for employees and others involved in accidents, insurance increases, leave wage replacement and property damage costs, we’re now able to see the true financial impact of accidents on businesses,” said Ken Robinson, market research analyst for Motus, as reported in Insurance Journal.

According to an estimate released by the National Safety Council, a nonprofit safety advocacy group, roadside fatalities in 2017 reached 40,100, affecting business automobile liability insurance rates. Motor-vehicle deaths decreased 2.1% from 2017 to 2018, the first 2% decrease since 2013. They named distracted driving as a primary cause of accidents, defining distracted driving as anything that takes the driver’s eyes or mind off the road, including of course texting or talking on the phone, but also using a navigation system, listening to music, drinking a cup of coffee and even daydreaming.

Related: Provide your commercial clients these safe driver management tips

The Centers for Disease Control and Prevention report that every day more than a thousand people are injured in crashes involving distracted driving in the U.S. – and that’s just those who own up to it.

In addition to factors that contribute to more crashes such as more people driving more miles, spending more time on the road, the National Highway Traffic Safety Administration (NHTSA) reports the increase in vehicular fatalities can be partially attributed to three main causes for the high number of traffic fatalities:

  • Distracted driving was a factor in approximately 10 percent of auto deaths.
  • Nearly 50 percent of the deaths occurred when passengers weren’t using seat belts.
  • Approximately 30 percent involved a drunk driver and/or an excessive speed.

 

How you can combat rising commercial auto claims

Let’s face it: Auto accidents are probably an inevitable occurrence in most drivers’ lives. Insurance companies and transportation experts have known for a long time that almost all accidents are preventable – even those for which you or your drivers were not at fault. Since most auto collisions can be chalked up to driver error (94 percent, says NHTSA), determining why they happened and how they may be avoided in the future requires looking at the underlying causes. Your insurance claims data provides only one piece of the puzzle.

Using your claims data to guide your prevention efforts starts with investigating and gathering information, followed by loss analysis, and then creating a plan for reducing the chances of future accidents. Following this process will give you more control over reducing auto liability losses than you might have expected.

Related: Fall road hazards for your auto insureds

The key to preventing auto accidents is in understanding the “why” behind them, says Zurich in their loss prevention guide. It’s important that you investigate what led up to the accident as quickly as possible after it happens. A critical step in protecting your employees and assets, accident investigation also aids in determining the accident’s cost of and fulfilling compliance and other legal requirements.

Zurich provides some questions to consider when investigating an auto accident:

  • Does the accident description given by your employee indicate that he or she is a considerate driver, or is there evidence of poor driving habits?
  • Does the accident description indicate good judgment by the driver?
  • Was the driver under any physical handicap that could have contributed to the incident?
  • Was the vehicle defective without the driver’s knowledge?
  • Would taking a route through less congested areas have reduced the hazardous situations encountered?

Add more specific questions based on the type of accident (e.g., rear-end collision, sideswipe, pedestrian collision, etc.). As you gather data from accidents moving forward, you’ll be able to identify frequency and severity trends and track your safety performance over time to see what preventive measures need to be enacted, and later, how they are working, to aid in your fight against spiking commercial auto claims.

They also recommend your safe driving program include these sections:

  1. Management commitment/assignment of responsibilities
  2. Vehicle use policy
  3. Driver selection
  4. Incident recording, reporting and analysis
  5. Employee incident reporting procedures
  6. Incident review board
  7. Vehicle selection and maintenance
  8. Driver training
  9. Safe driver rules

Faster reporting of an auto accident promotes better outcomes and can potentially save you money. That’s why same-day reporting of a claim is so important: Otherwise, property damage costs may increase due to exposure to the elements and longer down time; memories fade and you inadvertently may hinder the ability of the claims adjuster to more accurately assess your liability; and you run a greater risk that the other party will hire an attorney and file suit.

Related: 7 ways your clients can lower their commercial auto insurance premiums

 

More ways to battle rising commercial auto claims

Technology. Since most employees and employers track mileage for reimbursement purposes, claims experts suggest that one way to reduce accident costs is to limit mileage to work-related trips only. Technology is available for your company vehicles that track mileage via GPS, which pings as the vehicle makes stops throughout the day, via plug-in telematics or by a mobile app that can monitor mileage on a route-by-route basis, so that you’re aware when unscheduled or personal stops are made.

FAVR program. A similar option for employees using their own vehicles is to implement a fixed and variable rate (FAVR) reimbursement program. All drivers must submit their insurance policy and vehicle information that meet your coverage requirements or risk forfeiting their reimbursement. The program accounts for how much employees drive and where they drive during work-related trips only, lessening your company’s exposure to costs incurred from off-hour accidents.

Checking beyond an MVR. When you look beyond basic motor vehicle record (MVR) checks, you may be able to reduce the number of accidents dramatically. As quoted in the Insurance Journal article mentioned earlier, Dave Lewis at Motus suggested that MVRs don’t always tell the whole story as to whether a person is a good driver. He used an example of a female driver living in New York City with a spotless MVR, but little on the road experience because she drives rarely. When she gets a job with a company car that she crashes shortly thereafter, her employer is stunned – and on the hook for the loss and liability.

Insurance verification and training. Always checking insurance verification and providing individualized training and can reduce collision rates by as much as 35 percent. Include within your company policy a form that highlights the minimum insurance requirements that every employee signs upon hire, Lewis recommends. Not only can this identify potential driving safety issues, but also other future issues you may have with an employee with regards to following policy and taking care of their own personal business properly.

Ban personal devices while driving. Other employers have imposed a complete ban on the use of personal devices – both hand-held and hands-free – for employees driving while on company business. If you’re seeing a trend towards accidents caused by distracted driving, this is an option to strongly consider.

Related: Putting the brakes on auto fraud and theft [infographic]

 

Your part in mitigating commercial auto claims

Whether your business has its own commercial vans, trucks or autos – or your employees use their own vehicles while on company business, you can protect your bottom line by heeding the advice in this article. Examining the types of losses from you past your auto liability claims serves as a useful guidepost for reducing losses in the future. Your commitment is critical to keeping your employees – and everyone they encounter – safe on the road.

Resources:
Commercial Auto Claims Spike: Blame Safer Vehicles, Distracted Drivers
How Businesses Can Limit Costs of Work-Related Crashes
Distracted driving by the numbers
Using auto accident information to help prevent losses
Motor Vehicle Deaths Estimated to Have Dropped 2% in 2019

This article originally appeared in Arrowhead’s Tribal blog. It has been modified and updated to better fit the needs of our commercial clients.