Filed Under:Agent Broker, Commercial Business

Smoothing a rough road: Understand the drivers of commercial auto insurance costs

Risk managers can take these 9 steps to better control costs

A company's commercial auto policy may cover a wide variety of vehicles, but risks and costs can be controlled. (Photo: Shutterstock)
A company's commercial auto policy may cover a wide variety of vehicles, but risks and costs can be controlled. (Photo: Shutterstock)

The road is rough and potentially worse ahead. 

Commercial auto premiums increased 2.65% in April over the same period in 2016, according to the IVANS Index. Making matters worse, auto loss costs increased a cumulative 20% between 2012 and 2015, according to the Insurance Services Office.  

Risk managers, agents and brokers struggling to control soaring commercial auto insurance costs would do well to understand the factors behind this surge and what they can do to better manage exposure and expenses.

Drivers of poor performance

Six factors fuel the deteriorating performance of the commercial auto line:

  • More traffic – The number of miles driven is at an all-time high, growing 3.3% year-over-year in the first half of 2016, according to the Federal Highway Administration. More vehicles mean more crashes.
  • Distracted drivers – One-quarter of all crashes involve drivers talking or texting on cell phones, according to the National Safety Council.
  • Growing medical costs – Medical inflation is soaring 1.5 times faster than general inflation, according to the Bureau of Labor Statistics.
  • More accidents and more expensive crashes – Both the frequency and severity of accidents are increasing.
  • Inexperienced drivers – There is a shortage of skilled commercial drivers with good driving records, leading to more accidents and compelling some companies to lower standards for their employees who drive.
  • Rising auto repair costs – Record U.S. auto sales mean the roads are full of newer cars that are more expensive to repair. A recent Liberty Mutual study found the cost to repair minor front-end damage to a 2016 entry-level sedan was nearly twice as expensive as fixing the same 2014 model, due largely to more sensors and other new technology.

Related: Autonomous vehicle technology could shrink auto insurance sector by 71%

Car dashboard display with smartphone connected to data

Telematics can help businesses better manage their fleet vehicles and drivers. (Photo: iStock)

Smoothing the road

Risk managers, however, don’t have to sit back and accept poor commercial auto performance. Far from it. Partnering with their agents, brokers and insurers, they can take nine specific steps to better manage the line:

  • Implement a fleet safety program – Anything measured can be managed. So understand what’s causing accidents, set goals for improving performance and develop a detailed plan for managing fleet safety. Regularly highlight the plan for all employees. 
  • Enforce company policy on vehicle use – Clearly define who can use a company vehicle and create a process for approving who can drive their personal car on company business. The use of personal vehicles for company business can open the employer to potential exposure for any resulting accidents or damages and needs to be carefully managed.
  • Hire qualified drivers – Professional drivers are a company’s first line of defense against accidents. A resurgent economy can limit their supply, but lowering hiring standards may have significant safety implications. 
  • Consider a company fleet – Minimize the potential exposure of employees using their personal vehicles for company business. Conduct a cost/benefit analysis – based on a full understanding of this exposure – to decide whether a company fleet makes sense.
  • Train drivers – Go beyond making sure drivers understand the company’s equipment and driver management program. Be sure they get the company’s total commitment to safety and its central role as a core corporate strategy never to be compromised. 
  • Regularly check driving recordsChecking driver records is not a one-and-done process.  Like all important workflows, it is a constant. So set a schedule for checking the driving records of professional drivers, and those employees who regularly use their personal vehicle for company business.
  • Use telematics – Many fleets work with telematics vendors to help manage fuel, delivery routes and maintenance. However, these systems can also play a key role in tracking and improving driver performance.
  • Review all crashes– Unfortunately, accidents happen, even to good drivers and companies fully committed to safety. Those companies with the safest fleets learn from these events. Companies should provide drivers with accident kits that help collect key information immediately following an accident. This information can help defend against potential litigation and improve future driver performance.
  • Explore increasing primary Auto coverage limits – The boundary between primary and excess commercial auto policies has remained relatively constant over the past two decades, at $1 million. During that time, growing medical, legal and repair costs have eroded the protection provided by that limit. Today’s $1 million is insufficient protection. Commercial auto buyers can work with their agents, brokers and insurers to identify the benefits of increasing that primary limit and attaching to the excess policy at a higher level.

The challenges with the commercial auto line are clear. So too is the route to better managing that line to protect employees, the public and a company’s bottom line.


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Debbie Michel, leads the area of Liberty Mutual Insurance that provides primary casualty insurance to mid-size and large buyers through brokers and agents. Debbie can be reached at

Doug Manwaring, heads the area of Liberty Mutual that provides excess coverage to mid-size and large buyers, through brokers and agents. Doug can be reached at


Top 10 commercial auto carriers for 2016, as ranked by the NAIC

Direct written premiums for the commercial auto insurance market totaled $14.33 billion for 2016.

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